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Wednesday, October 17, 2007


Yahoo Manages Short Term Surprise

In founder Jerry Yang's first quarter as CEO, Yahoo! managed to surprise investors on the upside, by sending its stock up 9%. Although net income at Yahoo was down 5%, sales rose 12% driving quarterly net income to $1.8 billion before expenses. These earnings are much better than projected yet Yahoo the former undisputed kings of keyword search still face many challenges. Jerry Yang made sure to drive home that his mindset and focus is on the entire $45 billion online advertising market, not just keyword search a "lucrative subset of it".

Jerry Yang is stressing that Yahoo intends to be more active with "one-off services" around the world that will be cut off, much as Yahoo did in folding Yahoo Photos into Flickr, shutting down the revenue losing, resource draining, and clearly unpopular Yahoo Podcasts, as well as deemphasizing subscription-based music services and online tickets services in favor of ad-supported music programs.

Yahoo president Sue Decker says that Yahoo Panama, the much-delayed search ad system, is beginning to work. Revenue per search category was up 20%. And display ad revenue was also up 20% a rare acceleration after more than a 15 months of downward trends. No mention was made concerning declining PPC conversion levels or any new, sustainable click fraud prevention measures.

Yahoo executives stress that YHOO is more focused than ever on becoming the first stop for most people online, and will try to facilitate connections between people only as it supports the Yahoo starting-point strategy.

Given that social networks such as Facebook are increasingly the starting point for many people online, as well as Yahoo's previous emphasis on connecting users with other people and their passions, it is not clear what Yahoo's next steps are in the emerging social networking arena.


Wall Street Shows Lust for Google and Caution For Yahoo.

Search Engines Continue To Lead Technology Stock Plays.



Internet earnings season shifted into high gear this month with the major search engines drawing the largest spotlights. Yahoo the once proud grandfather of keyword search is being viewed with caution and the ever elite Google guys are drawing sheer lust with daily run-ups topping $600 per share. Some investment analysts (still unsure of the keyword search space) are happy plodding slowing along as they increase their stakes with Yahoo and continue to look for optimistic signs of its ability to catch up with Google’s keyword advertising strength.

Deutsche Bank analysts predict Yahoo results to be in-line with expectations or just slightly below as they place a humble and down $24 target on Yahoo shares which is nearly 15% lower than Yahoo's recent share price trends of $27+. Other high rolling investment firms clad in french cuff shirts and designer cufflinks expect Yahoo’s earnings to drive and support a confident $30 target, suggesting that Yahoo stock will rise nearly 8% during the next year.

Yahoo shares are up 9% so far in 2007, and the company has been through some significant changes with the departure of former CEO Terry Semel, who was replaced in June by co-founder Jerry Yang. The Yahoo Panama advertising platform was launched to help the former king of search better compete with arch rival and long-time Yang friends Google for the coveted search-advertising dollars. Recent speculation and hints by Jerry Yang that Yahoo will be sold off in chunks with AT&T gobbling up many profitable parcels have also helped Yahoo prop their share prices up. Some market analysts including a leading broker from a flint hospital also view Yahoo as more successful than Google in getting advertisers to spend more money on search ads quarter-over-quarter. Those hidden Yahoo Pay Per Click account re-charges might drive short-term results however they also spike advertisers frustration levels and push quality PPC accounts away from Yahoo toward Google and MSN.

Speaking of Google the lust for GOOG is running huge on the street, Goldman Sachs analysts deemed Google as their top pick in the Internet industry and view Google and keyword search as the primary driver of the Internet stock sector that is up nearly 50% year-to-date. “We continue to view the Internet sector as our favorite sector across communications, media and entertainment given the benefits of strong secular growth trends and significant international exposure, both of which offset a U.S. slowdown, especially in newspaper, radio, and television advertising.”

One analyst added “The performance-based nature of keyword search advertising and its ability for direct response lead to higher portions of advertising budgets being allocated to the major search engines, especially Google AdWords. We do have a concern with one aspect of Pay Per Click Search Advertising: Click Fraud.”

In researching the numbers "we find few companies as well positioned as Google.” Google Investors are looking for new updates on Google's continuing transformation of YouTube and quality of overlay advertising within the online video space.