As the financial market plunged last week, UBS on Thursday cut its third-quarter and 2009 estimates for Internet companies, which rely on online advertising and consumer spending.

UBS analyst Ben Schachter lowered earnings projections and price targets for Yahoo, Google, ValueClick and eBay. He said Google is “the best-positioned to weather the economic downturn because of continued demand for search advertising,” according to Media Post.

Although the first two months of the third quarter were decent, “we believe September was difficult” due to a softening display ad market, according to Schachter in a research note.

“Ad budget cuts will affect both online and offline spending through 2009, but we think that the continuing shift to online will be somewhat accelerated by the macro weakness,” Shachter wrote in the note, Media Post reported.

Summaries of the third-quarter outlook on the four online companies are as follows:

Google: Price target cut: US$700 to $525 “Due to its exposure to highly measurable and accountable search advertising, likely held up better during the quarter, and we expect its 3Q results will likely be slightly below consensus expectations,” according to the note. Risk is that Google is lacking significant improvement in monetization during the quarter and economic downturn, but UBS still rated it as long-term buy.

Yahoo!: Price target: $28 to $20 UBS concerns about Yahoo's executing on its core ad business and continuous softness of display advertising, “but we still think that there is money to be made with this stock in the longer-term.” Yahoo will either have new management come in and 'right the ship,' or be acquired, most likely by Microsoft, which UBS “still believes to be the most likely outcome.”

ValueClick: Price target: $13 to $8 The ad services company is hit by the drops in online advertising. “While the company is proactively moving to try and protect margins and buy back stock, we believe the fundamental businesses will continue to be impacted by forces beyond its control,” according to UBS. Chances remain for a possible tie-up with AOL and/or Microsoft.

eBay: Price target: $28 to $18 eBay is now in the midst of an identity crisis, according to UBS. Besides being the online marketplace for new and used goods, “it also clearly wants to compete in fixed price listings to spur growth in its core.” The key question is how the weakening economy is affecting the company's payment business (both on and off the site). A "meaningful contraction" in its core auction business is expected in 2009, according to UBS, Media Post reported.