Saturday, September 17, 2005

Yahoo!'s position in the search wars

Yahoo! now doubt is number two in search usage after the clear leader Google but nicely ahead of Microsoft's MSN. Back when I was working for Yahoo! around 2001 the company realized that Google was a threat. Something had to be done.

Google had found the formula for monetizing their widely used search engine after looking Overture over the shoulder. Overture invented the paid search links, but more and more people were using the widely popular and superior Google. Overture had the paid search technology and the customers and Inktomi, that before Google had supplied Yahoo! with search results, had some of the technology. Both companies amongst others were bought by Yahoo! to rampen up their search efforts, and start competing head on with Google. Yahoo! now also became a search company. The year was 2002.

No doubt Google has a clear lead in many areas especially in usage. However, people who really understand the technology say, that Yahoo! has made more hard core advances than Google the last year or so (mentioned in an earlier post). From an investment point of view, my point is, that if Yahoo! can leap past Google in search PLUS have so many other profitable business areas as they do, then Yahoo! could once again become a Wall Street darling and post great gains to their investors. But before this can happen - Yahoo! needs to get ahead of Google and the public needs to experience/perceive this as well. Also Yahoo! is running out of time. Two years ago they were making more than Google, now Google is making almost twice as much as Yahoo! on EBITDA and Google is growing faster. So in the not far foreseeable future, Yahoo!s research and investment funds are going to be far behind Google. In that scenario, it should not be difficult for Google to further secure their by far number one position in search usage.

So can Yahoo! do it? Well, it is going to be one of the focus areas of this blog, so that we can make the right choice as investors.

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