Cuts Forecast After Display Advertising Slows Group Ltd., a Russian operator of social networks and online games, fell 12 percent after reducing its full-year sales forecast as companies curb spending on Internet ads amid a slowing economy.

Full-year sales will grow 14 percent to 18 percent, the Moscow-based company said today. had previously projected 22 percent to 24 percent growth. The company also reported first-half earnings and sales trailing estimates.’s display-advertising revenue fell about 10 percent in the latest quarter, with Russia on the brink of recession amid a standoff with the U.S. and Europe over Ukraine. relies more on display advertising, for example banners, than Internet peers such as Russian search engine Yandex NV, which gets more revenue from text-based ads.

“The underlying economic and geo-political environment has continued to become materially more challenging,” Chief Executive Officer Dmitry Grishin said in the statement. “This has had a negative effect on our advertising revenues, and in particular the display advertising revenues.” dropped $3.84 to $28.80 per depositary receipt in London today, taking the decline to 35 percent this year.

September Budgets

The company reduced its sales forecast by more than expected, said David Ferguson, an analyst at Renaissance Capital in Moscow.

“The issue is whether the company is just being cautious or the market will indeed be that bad,” he said by phone. “If advertisers come back in September with budgets for the fourth quarter, can still show decent numbers.” The stock will be “pretty volatile” until then, Ferguson said.

Earnings before interest, taxes, depreciation and amortization rose to 8.05 billion rubles ($224 million). Analysts projected 8.38 billion rubles, the average of estimates compiled by Bloomberg. Sales increased to 15.1 billion rubles, missing the 15.6 billion rubles analysts predicted on average. paid 12.43 billion rubles in April for 12 percent of Russia’s largest social network VKontakte, it said today. This values VKontakte at more than $2.8 billion. is controlled by Russian billionaire Alisher Usmanov and part-owned by China’s Tencent Holdings Ltd. and Africa’s Naspers Ltd.

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