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Yahoo Pressed From All Sides

Yahoo Pressed From All Sides
Travis Roy  |  by www.webpronews.com. All rights reserved. 27.11 | 21:29

-- Bowie, Queen, and one of the most memorable bass lines in pop music, Under Pressure

Although no one has forecast the downfall of Yahoo, or even a timely acquisition of it by Microsoft, there may be more to the complaints about its business model than just the usual chatter. The past three months have been brutal for the company. After announcing in July their long-awaited upgraded search advertising system, Project Panama, until 2007, Yahoo's stock price plunged from 32.

24 to 25.20 per share. Yesterday it closed at 24.

12. Seeking Alpha about the parade of analysts rushing to downgrade their ratings on Yahoo. The lower ad sales blamed for Yahoo's dismal third quarter numbers have had analysts trying to figure out where to pin the cause for that.

One recently stated reason, a softer real estate market with fewer searches for homes and mortgages, looked more like a result of a broader issue - Google gaining that ad revenue at Yahoo's expense:

Yahoo's real estate revenue risk is merely a function of declining search market share. Yahoo is losing real estate ad revenue to Google, which isn't even in the online real estate biz. Yahoo, as a portal, makes a decent chunk of its advertising dollars on its own content.

Compare this to Google which only sells ads on other people's content. In terms of ad-space-inventory, Yahoo will continue to lose market share as long as its content is growing slower than the internet as a whole.

Google's gain is Yahoo's loss, and with Google's persisting dominance in search, that isn't going to reverse itself anytime soon.

The delay in launching Panama adds to the problem, and a 2007 launch for Yahoo's ad platform with improved contextual relevance is starting to look farther and farther away. Then there is the perception that Yahoo has to go out and make some kind of acquisition to keep pace with Yahoo. USA Today Yahoo is under pressure to spend a billion dollars on Facebook, so that makes it true, doesn't it?

"We think Yahoo is being out-executed by Google in terms of innovation, financials and partnerships/acquisitions," Scott Kessler, an analyst with S P's Equity Research Services, wrote in a note to clients on Tuesday. "With its shares close to their 52-week low, we believe the pressure is significant for Yahoo to do something meaningful to garner positive interest and restore investor confidence," he said.
Whether or not Yahoo investors would see a $1 billion price tag for a social networking site with nine to ten million members as restoring their confidence is a question only the market can answer.

It's easy to imagine Yahoo could duplicate Facebook's functionality, and that many of Facebook's members are Yahoo users already. Even if they made this deal, someone still has to pay Microsoft a breakup fee, as it currently provides ads on Facebook under a contractual agreement. While being second in search has not bolstered Yahoo's fortunes, the company still has a few billion dollars in cash and continues to make branded advertising deals.

At press time, the ad running on Yahoo's home page in premium, above the fold placement, is an advertisement for Chrysler. Auto and finance ad sales may be soft, but Yahoo brings them in anyway. Maybe that is cause for positive interest in Yahoo.

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