Google vs. Yahoo - Who Will Dominate Online Advertising?
I recently picked up a bunch of Yahoo (YHOO) shares to get some exposure to the very hyped tech sector. A sector that is currently being dominated by the Google (GOOG) machine. Now either one of these stocks I would recommend right here as Google just got a new record high price target. Piper Jaffray analyst Safa Rashtchy lifted the firm's price target for 2006 to $600 from $445. So why did I decide to go with Yahoo?
UPDATE: A rumor has surfaced on the street suggesting that Microsoft (MSFT) might make a bid for Yahoo (YHOO). Yahoo was also upgraded by Goldman Sachs (GS) and this has sent the stock up nicely this morning. Please keep in mind that the MSFT/YHOO takeover is just a rumor and I will keep you posted as I learn more.
Well there are a couple of reasons and the first is that I think Yahoo is set to cut into Google's cash cow. That cash cow is the online advertising business, aka Google Adsense. The recently released Publisher's Network, the Adsense equivalent from Yahoo, offers many benefits over Adsense. The biggest benefit being the amount of money that people hosting the ads can make. The Publisher's network has not yet caught on and this can definitely be seen in the stock price. Yahoo is flying under the radar screen with this one and I don't believe that Wall Street has caught on to how big of an impact this new network is really going to have for the company.
Imagine if you are a business who wants to advertise on your site and you have a clear choice of making 1 dollar per click or 10 dollars per click. Now this choice seems logical right? Now lets switch this choice around a bit and say that you are an advertiser who can choose to go with Internet giant Google or the second place finisher Yahoo in Beta form. This is how wall street sees things - and it won't be until later this year (or whenever the Publisher's Network really catches on) that you will see a swing in the stock. If Yahoo is able to cut into this portion of Google's cash cow then the stock should benefit dramatically. Google's revenue will exceed 5 billion dollars this year and Yahoo's will be very close behind, yet the stocks performances have been much different.
If Yahoo is able to even remotely challenge and take some market share from Google in the advertising world, then I think you could see a nice positive upturn. Yahoo is also much more diverse in terms of its revenue stream comparatively speaking to Google. Some might argue that Yahoo is the Internet Jack of All Trades, but you know what they say about that... "Jack of All Trades, Master of None". So whom do you think will fair better this year? Google or Yahoo?