On Tuesday Yahoo said it faced “headwinds” in 2008 and forecast revenue growth below Wall Street expectations and said it would cut 1,000 jobs.

Hardly blindsided, Wall Street still expected better numbers. On Wednesday morning at least seven major brokerages cut their price targets on Yahoo stock.

Yahoo co-founder and Chief Executive Jerry Yang predicted a tough 2008.

“While we will continue to face headwinds this year, we believe that the moves we are making will help us exit 2008 stronger and more competitive and return to higher levels of operating cash growth in 2009,” he said in a statement.

So how might these headwinds mean affect Yahoo’s larger rival in the Web advertising space: Google?

Both companies compete in paid search, a form of marketing where advertisers pay when customers click on ads.

Google is scheduled to report its quarterly numbers on Thursday and already some analysts are wondering whether Yahoo’s difficulties are its own or industry-wide impact from a slowing economy.

Analysts expect Google to fare better in an economic downturn with its dominance of paid search says Citigroup analyst Mark Mahaney. But Mahaney rates a Yahoo a “hold”  despite his concerns of Yahoo’s potential to be acquired as well as its “still very large” Web presence.

(Reuters)

Keep an eye on:

• MySpace will launch its program to court outside software developers in February in a bid to widen the gap against rival Facebook. (Reuters)
• Bidding remained stalled on a key piece of spectrum in the U.S. government’s wireless airwaves auction. (Reuters)
• British-based educational publisher Pearson has agreed to sell its 50 percent stake in German business daily Financial Times Deutschland to publishing Gruner + Jahr. This gives G+J full control. (Reuters)