April 23, 2007 4:00 AM PDT

Google rises at Yahoo's expense

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"Yahoo is still trying to play catch-up, and Google hasn't taken their foot off the gas pedal," said Derek Brown, an Internet analyst at Cantor Fitzgerald. "Yahoo has been very slow to recognize changes in the marketplace, in a nutshell...They were late to recognize that search itself was becoming a big deal."

Yahoo executives often describe their outfit as a media company, creating and packaging content. But efforts at original content have largely been a disappointment. Yahoo announced in December that Lloyd Braun, the Santa Monica-based head of Yahoo's media and entertainment group, was leaving the company. Yahoo has also jumped on the social media bandwagon, integrating user-generated content from its large number of users into its network of sites and services, but it has failed to establish any significant partnerships with other social-networking companies to expand its advertising system.

"Yahoo seems to struggle with the idea that they should have content they own and control," said Danny Sullivan, who founded the Search Engine Land blog. "Only lately has Yahoo come to the idea that they could put ads on other people's properties. Google has done that far longer. With AdSense, Google has made the Web their playground...Their job is to take a percentage of everybody else's ad revenue."

Despite all that gloom, there are still some bright spots at Yahoo. It's still the most visited site on the Internet, and executives there say ad sales from the company's new search advertising platform, Panama, are expected to boost revenue in coming quarters. "We are very pleased with the initial progress of Panama," Chief Financial Officer Susan Decker said in an interview last week. Revenue per click, which reflects how much advertisers are willing to pay for the keywords associated with the ads, did not decline as much as was expected, Decker added.

But ultimately, as the revenue gap grows, the idea of Yahoo catching Google gets harder and harder to imagine.

"Google has an advertising platform that allows it to monetize it at a rate nobody else can," said Scott Devitt, an analyst at Stifel Nicolaus.

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8 comments

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It's an unfair fight
In many ways this is an unfair fight, for the very reasons you mention in the article--Yahoo thinks of itself as a media company, not a technology company. Unfortunately for them, search advertising is more of a technology business than a media business. At least for now, and the forseeable future.

Ultimately though there is room for both companies to grow and prosper. Yahoo just needs to double-down on being a great media company with good technology, rather than trying to become a great technology company that can challenge Google's dominance.
Posted by rexworld (46 comments )
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Poor analysis
This article looks like a very poor analysis of the current market, but it is a good description.

Assuming nothing will change in the way Internet is used for business, the author is right, but let's try to learn our lessons here!

Google's business model is extremely week and only depends on their capacity to offer the illusion of the best search results. If the Internet evolves toward different content or different interfaces (Mobile?), Yahoo! could take advantage of its portal and media approach.

Just look at how Yahoo! News and Yahoo! Go succeed. Google does not stand a chance and I am betting on it!
Posted by fellowshipofone (1 comment )
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Bad CEO choice
Terry Semel is a smart guy, but he is not the best CEO for a technology company. Yahoo founder shouldn't have hired him at the first place. They needed some one who understands the technology pretty well, not a media guru. It was quite natural that Semel tried to build a media empire out of Yahoo. I am sure Semel is a great guy, but is not a guy who understand technology (he hadn't sent an email in his life before joining Yahoo).

It's not end of life for Yahoo, they need to move a much faster rate in becoming a true technology company. They are not doing bad as a media company, but if they want to stay as a media company they should forget about winning the race with Google.
Posted by virtman (37 comments )
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Go Google
They deserve their success because they innovate.
Posted by t8 (3716 comments )
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Whatever.
Give it a few more years and more dominance and people will pick another new toy to "challenge" the system.
Posted by mr. cynical (23 comments )
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Whatever.
Give it a few more years and more dominance and people will pick another new toy to "challenge" the system.
Posted by mr. cynical (23 comments )
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Inspiring Googleplex Factor?
i was in silicon valley few weeks ago, visited googleplex the Google HQ, i was impressed. the secluded green environment, 1-2 story buildings hidden away within forest of green trees and flowery gardens, then i paused for a moment, i said to myself, 'man! i can work in this place for free'. i was inspired, place makes you feel good. now thinking back, i say 'no wander! so successful google is.'

that day i also saw yahoo's failure, scattered multi-story buildings that looked so yesteryears', uninspiring.

i suspect people go to work at yahoo 'just to have a work' and people go to work at google to do something.

that makes all the difference between success and failure.
Posted by ismetd (20 comments )
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a new topic -architectural design and the desire to actually work
this is something worth looking into.
some research is worth doing.

maybe one day we can all have better designed more pleasurable places to create in, rather than boxes for drones to stagnate within.

alas, I have yet to see googles complex. I am just a mere cog in one of the boxes out in Asia... but without the base of box to begin from, where would evolution of architecture be?
Posted by mattofasia (4 comments )
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