YAHOO! Inc fell 4.5 percent on Friday, making it the biggest drag on the Nasdaq Composite Index, on concern that a slowing economy will curb advertising sales.

Yahoo!, owner of the second-most popular group of United States Websites, slipped 93 cents to US$19.89 after earlier declining as much as 7.4 percent. The stock, which has lost 14 percent this year, lost ground on a day when the Nasdaq Composite Index rose 3.4 percent, Bloomberg News said.

Clients may be tightening budgets as consumer demand slows, hurting sales of the display ads that appear on Yahoo!'s sites, said Colin Gillis, an analyst at Canaccord Adams Inc in New York. Yahoo! makes almost 90 percent of revenue from advertising. A 17-percent jump in the past 10 trading days has also tempted some investors to sell the stock, Gillis said.

"It's widely suspected that the September quarter is going to be very weak for display-based advertising, which is Yahoo!'s bread and butter," said Gillis, who has a "hold" rating on the stock and doesn't own any. "Yahoo! got taken over by speculative money and new fundamental investors have no particular reason to jump into the name."

Yahoo!, based in Sunnyvale, California, is scheduled to announce third-quarter earnings on October 21. Spokeswoman Diana Wong didn't respond to an e-mail seeking comment.

The company has reported three years of slowing sales as Google took a larger share of the Internet advertising market. After rejecting a US$47.5-billion acquisition offer from Microsoft Corp this year, Yahoo! plans to boost revenue by showing some ads sold by Google, which command higher prices.

Co-founder David Filo said this month that Yahoo!'s five-year stock return will show it was right to reject the offer from Microsoft, the world's largest software maker. The Google agreement, under review by the US Justice Department, and a plan to let other companies create features for Yahoo!'s sites, will spur revenue growth while Yahoo!'s long-term strategy takes hold, Filo said. Yahoo fell further behind Google in the Internet-search market in August, according to researcher ComScore Inc.