There have been rumors for months that Yahoo! (NASDAQ: YHOO) would cut costs, and probably a lot of people. Some of those estimates have been as high as 3,000. Now, The Wall Street Journal is reporting that the specifics of the move may be announced during the earnings release later this week. According to the paper, "The exact number of jobs to be eliminated remains unclear, though it is expected to exceed the 1,000 jobs that Yahoo announced it was cutting in January."

Forget Yahoo!. The news means that an entire portion of the media industry that was recently viewed as relatively immune to an economic downturn is now under siege. For the last three years, analysts have said they expected Internet display advertising to grow at double digits rate for the next half a decade. The Internet has a relatively small portion of the ad market compared with media like TV, but it is viewed by just as many people. Display advertising should, therefore, be growing faster than other forms of marketing simply to catch up to its fair share of the consumer media audience.

Two things happened to derail the conventional wisdom. The first is that no one thought that even a recession would significantly damage Internet revenue growth. It has been viewed as a more efficient, targeted way to reach people. The second is that few people saw that Google (NASDAQ: GOOG) would take up such a huge amount of overall Internet marketing budgets. Its earnings show that it is sucking all of the air out of the room of online budgets. Search advertising is apparently even more effective than display.

If Yahoo!, which is the company with the largest share of display ads is hurting so badly, what does that mean to the Internet divisions of huge media conglomerate like News Corp (NYSE: NWS), which owns MySpace, or Viacom (NYSE: VIA)? It means no good.

Douglas A. McIntyre is an editor at 247wallst.com.