WebMD is bringing in less ad money and facing increased competition from smaller, similar websites, Wall Street analysts said this week.

Goldman Sachs analyst Jennifer Watson downgraded shares of WebMD Health Corp. yesterday, becoming the second analyst this week to voice concerns about competition to the health information Web site.

Watson downgraded the stock to “sell” from “neutral,” and said in an investor note that new, lower-priced networks could take a larger portion of advertising revenue from pharmaceutical companies, adding that pharmaceutical advertisers may cut back on spending due to uncertainty in the economy.

Earlier in the week, ThinkPanmure analyst William Morrison lowered his rating to “sell” from “source of funds,” causing shares to slip. The stock lost $1.56, or 4.5 percent, to $33.17 in trading early Monday morning.

Morrison claimed the number of ad campaigns on the WebMD site is down about 6% as it faces increasing competition from ad networks that charge lower rates, while the number of new advertisers is down by more than 50%.

Both analysts hold a price target of $28 per share. The stock closed at $34.41 following Wednesday trading.

On Wednesday afternoon, WebMD CEO Wayne Gattinella and CFO Mark Funston refuted the notion that the company is seeing a deterioration in the number of ad programs provided in the second quarter, during an investor conference sponsored by William Blair & Company.

WebMD management said they anticipate the number of ad programs in the second quarter will increase both sequentially and year-over-year.

William Blair & Company analyst Corey Tobin wrote in a note to investors:“We continue to believe that WebMD Health remains in strong position to benefit from several important health care trends (particularly the shift away from traditional pharmaceutical marketing methods and toward the Web).
Moreover, we came away from management’s presentation at our growth stock conference with a slightly more positive view of near-term business trends. That said, we will maintain our Market Perform rating, as we remain valuation conscious in the face of end-market uncertainties…”