A few interesting developments and announcements - albeit not shocking - coming from the Yahoo! camp as they release their third quarter results: sales rise 20%, profits down 37%; accounting changes to account for how stock options are expensed.
Since the company had pre-announced that sales would be soft vis-a-vis analyst expectations, the focus was on projected numbers for Q4 and any announcements in terms of strategy, product launched and acquisitions.
For one, Yahoo! finally began to offer advertisers the ability to test their new search platform, codenamed Panama. Mind you, one can guess that Yahoo! would have positioned the slightest progress (a brochure for all I know) to be a step in the right direction, otherwise, investors would have pummeled them. Apparently, the test has been launched in the US and slated for worldwide rollout in 2007. It never ceases to amaze me how much the Street can get so excited about something so intangible, nonetheless, if the system sets out to mymic Google’s formula, then it should be a step in the right direction as Yahoo! seeks to narrow down its lower propensity to maximize the monetization of its search queries.
Also of note is CEO Terry Semel’s admission that Yahoo! is out for potential takeovers and acquisitions in social media and web video. Funny, at the risk of sounding like a smartass: it failed to scoop up YouTube - the #1 in video online - and failed to close the Facebook deal, but, assuming he means it, that might help Yahoo! accelerate growth plans.
Last but not least, the Board approved the company to buy back $3 billion of shares over the next three years.
All in all, I see the stock is inching up in after hours, maybe it’s the buyback.
Please note that I own shares in the company when I say this: I am extremely bullish on Yahoo!’s long term hopes; . The stock is down 40% this year… yet projections for the Web grow by the day.
I think the Google threat in display, banner and video ads are overblown. Do not get me wrong: Google is a phenomenal machine that - so long as paid search does not pull a meltdown - will be worth far far more than it is worth today in a few years. Its degree of financial and operational leverage (the leverage / multiplying factor at which its revenue trickles down to its income, not just its profit margin) has the potential to be staggering due to its high level of automation.
But, the fact remains: Yahoo! is stronger in search than Google is in non-search areas of online advertising… at least today.
Maybe that is why I am starting to worry about Yahoo! If the market is already so discounting Yahoo! to Google ($35 billion to $120 billion in terms of market cap), what will happen when Google accelerates its forays in display, banner and video advertising. It has, after all, already bought YouTube - though YouTube cannot capitalize on video advertising growth as it stands now.
Alas, I still think that Yahoo! can gain market share in search because at 50% market share, every incremental percentage of market share is harder for Google to win than for Yahoo, MSN and Ask.com to win (think “Any Given Sunday” and that line about how much tougher each yard is to secure the closer you get to the endzone).
It would help if Yahoo! wasn’t so darn complacent sitting atop its perch. I’d love to share some anecdotes about my dealings with Google and Yahoo! (I’ll spare the ones about MSN though, there’s not enough ink in the world to cover that).
You’d think Google would think it owned the Web yet it rushed like hell to close the YouTube deal. But even Google is a tad complacent. The point is, both Google and Yahoo! are mature, but Google has been acting like Yahoo! should. Yahoo! has suddenly become the stock you can both live with and without; while Google is the stock you’d be crazy to own and pass up.
Nonetheless, I think it’s wise for Yahoo! to be conservative with Q4 estimates… let’s see how the year unfolds for the king of new media.
Digg this Blog
Share on Facebook
WatchMojo on Twitter
WatchMojo on YouTube
Add to Favorites
WatchMojo Newsletter
