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Savings Experiment: Snow RemovalThis post is part of our Battle of the Brands feature. Let us know which brand you prefer, and watch out for more Battle of the Brands posts.
Yahoo! Inc. (NASDAQ: YHOO) was the shining star of the internet bubble in 2000, just before the dot-com crash, and has managed to keep a huge customer base (tens of millions, if not hundreds of millions based on how you calculate it). Yahoo! customers are loyal apparently, even though Google has trounced Yahoo! in recent years in terms of search popularity and overall brand awareness. Like Google Inc. (NASDAQ: GOOG), Yahoo! was founded by Stanford grad students, Jerry Yang and David Filo, so that information on the web could be more easily found back when the web was in its infancy -- 1995.
From 1995 to 2001, Yahoo! grew at a rapid clip, and then saw a downward spiral as advertising fortunes started collapsing at the same time Google's "text ad" advertising model started growing by leaps and bounds. It's pretty obvious by now that Yahoo!'s "one ad for all" approach grew quite stale (and so did its revenues) at the same time Google's "customer relevant" and unobtrusive ad model grew an an inversely proportionate rate. Yahoo! has made great strides on the comeback trail under five-year CEO and Hollywood expert Terry Semel, who has modeled Yahoo! as a "relationship builder" to customers (and gotten them to pay for certain services).
This model is quite opposed to Google's "tool-based" customer model that can't touch Yahoo!'s model for creating and enhancing actual relationships with paying customers, beyond just providing easy internet tools for customers while keeping that "relationship" quite distant. Yahoo! shares spit almost three years ago, but have remained between $29 and $44 per share since that time. By contrast, Google's shares have skyrocketed from $85 in August 2004 to over $460 today. In terms of an investment over the past five years, it's hard to draw a conclusion since Google has been publicly traded for less than three years, while Yahoo! has been traded for quite a bit longer than that.
Google Inc. (NASDAQ: GOOG) has shined incredibly bright in the past two-and-a-half years since going public on the NASDAQ in the mid-$80s, with a share price of over $460 as of today. Google's fortunes have risen so rapidly that some pundits claim it can do nowhere but down from here -- but I disagree to a point. Google started out as the brainchild of Stanford students Larry Page and Sergey Brin (what is Stanford putting in the food there?), who wanted a way to collectively index every single thing on the world wide web and make it available as easily as possible to anyone. To this day, Google's homepage is a model of simplicity, and it most likely will stay that way.
When Google started its industry-transforming AdWords program to allow text advertising next to all its web search activity, customers were apparently enamored enough to start clicking on all those ads (if they even knew they were ads), as Google's penchant for ensuring the most relevant information was given to each web search customer came shining through. In addition to the relevancy of normal web searches, Google's ad program was designed to give customers the most relevant advertising messages as well. Whaddayaknow -- people liked it. Google has gone on to become a huge internet brand (if not the largest, past Yahoo! and eBay) with a revenue stream that puts Yahoo! to shame. And, it was all built on giving customers the most relevant information possible. Apparently, global customers responded in a big way, and Google has expanded its product offerings to match many of those from competitors Yahoo! (web-based e-mail) and Microsoft (online word processing and spreadsheets). GOOG shares went public in large fanfare fashion in August 2004 and have skyrocketed since that time, as the below chart shows:
So, who's the champ here? By a revenue and profit perspective, Google currently wins by a decent landslide. Taking the entire web visit numbers from all web properties of both Yahoo! and Google, Yahoo! wins in terms of getting customers to its network. But in terms of monetizing the audience in the most profitable way, Google wins big.
Is there a clear winner? That depends really, based on the metrics you choose to use. Bottom line: share price increases, even with Yahoo!'s split in 2004, heavily favor the Google investor -- no gray area there.
Be sure to vote in our poll for Google or Yahoo! as your preferred brand, and lets us know why you love it in the comments. Results of all Battle of the Brands match-ups coming soon.
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