Yahoo! (NASDAQ: YHOO) yesterday posted its lowest price in nearly five years. The stock moved to $17.75, down from a 52-week high of $34.08.

The Wall Street Journal pushed the idea that this was an options play. "Trading in Yahoo options leapt to four times the normal level as investors picked up 168,000 calls that allow them to buy the company's stock." In other words, some traders are willing to gamble that the shares will go up.

But, they won't go up. There is growing evidence that marketers prefer search internet ads to display advertising. Yahoo! sells a great deal of display inventory and is a distant second to Google (NASDAQ: GOOG) in search. Some of that may change as Yahoo! begins to use the Google system to create its search results.That may not offset the fact that Yahoo! probably has as much display advertising availability as any company in the world.

Because Yahoo! has shown it is unwilling to make major cost cuts, a flattening of its revenue growth would be a disaster for its investors. The firm's year-over-year sales improvement is already barely above 10%. What had been a growth stock three or four years ago has now become a buyout gamble. Investors still hang on to some hope that Microsoft (NASDAQ: MSFT) or a large media company will make an offer for the portal company.

That means that Yahoo! still carries a "takeover" premium, which begs the question of where the shares might trade at the end of the year, if there are no offers. Investors are gambling that there is a 30% chance that Yahoo! will be bought, if it is not, the stock heads toward $13.

Douglas A. McIntyre is an editor at 247wallst.com.

New evidence shows that online advertisers are building their search engine marketing and moving away from big display ad investments. According to The Wall Street Journal, "Faced with a slowing economy, advertisers are sticking to what they view as the safest way to reach online customers directly: the plain text ads that appear on search-result pages."

To state the obvious, the news seems to be bad for Yahoo! (NASDAQ: YHOO), Microsoft (NASDAQ: MSFT), and AOL. These portals rely heavily on display ads for their revenue and have modest search income.

The data is much, much worse for newspapers. Companies like The New York Times (NYSE: NYT) are counting on online advertising to take the place of falling print revenue. A great deal of the advertising that runs at newspaper sites is retail and national display. Total ad revenue at The New York Times dropped more than 16% in July. Internet advertising was up less than 1%. Clearly, at that rate, online ads can do little to help that nation's big dailies.

The portals will struggle to keep their display growth intact. They have the lion's share of the market, so scale is on their side. They will almost certainly have the best chance of picking up the marketing dollars from the largest online advertisers. Even if the market keep slowing, their sales should be steady to modestly up.

Newspapers will not be so lucky.

Douglas A. McIntyre is an editor at 247wallst.com.

Yahoo! (NASDAQ: YHOO) and Google (NASDAQ: GOOG) are supposed to be friends. The portal company is even thinking of using the search company's technology to sell ads and make more money.

But, friends can be rivals. Maybe.

Yahoo! is launching a "free tool that will allow developers to build customized search services based on its own search technology," according to The Wall Street Journal. The program should bring in new developers and even convince smaller search companies to build on the back of the Yahoo! search system.

All of this may help Yahoo!'s search functions to get better, but it could alienate Google, which may be Yahoo!'s most important ally. One of the portal company's best options in staying out of the hands of Microsoft (NASDAQ: MSFT) is to outsource much of its search-based advertising to Google, which has a system that yields better revenue. By some estimates this could eventually increase Yahoo! profits by several hundred million dollars a year.

Yahoo! runs the risk of causing a rift with Google. But, who cares? Carl Icahn will probably be running Yahoo! soon and plans to sell it as fast as possible. A new search strategy is not going to help Yahoo! with that.

Douglas A. McIntyre is an editor at 247wallst.com.

Many Wall Street analysts thought that when Microsoft (NASDAQ: MSFT) lost its bid for Yahoo! (NASDAQ: YHOO) that it would take the $45 billion it was going to spend and buy other online companies.

Think again. Microsoft's management says it is not so. According to the FT, "Steve Ballmer, chief executive, scotched talk that Microsoft would turn to a `plan B' of other acquisitions to boost its online presence." Ballmer feels that buying more internet companies will not improve its share of the search market. He is not simply after more pageviews.

The news is probably disappointing to several large online companies. AOL, Facebook, Monster (NASDAQ: MNST), and Digg might all have been part of a Microsoft plan to improve the size of its presence on the web.

The Microsoft comments send another message. Search is important. Display advertising is not. Search is an efficient way to make money. Display advertising's best growth years are behind it.

If Ballmer is right, the online world is about to go through a major upheaval.

Douglas A. McIntyre is an editor at 247wallst.com.

It seems to me like the ultimate test of a tool lies not with its functionality, but with who uses it. This goes double for search tools, as their ability to access information vastly increases their popularity, and thus marketability. Personally, I firmly believe that most questions in the world can be answered by one of three sites. If it's a movie or TV question, I head to IMDB. If IMDB doesn't have the answer, I generally head over to Wikipedia. And if, for some reason, Wiki's answer doesn't suffice, I pull out the big guns and head over to Google (NASDAQ: GOOG). Of course, so does pretty much everyone else in the world.

This, of course, explains why the United States has begun investing heavily in Google Ads in foreign countries. While the government's online presence is pretty impressive, even the best website is only useful if it can generate hits; given the United States' overseas unpopularity right now, getting foreign nationals to visit its sites is an uphill battle. With this in mind, Google now displays ads for various United States government agencies when the user enters various key words and phrases. Currently, the terms that will generate an ad from the America.gov website include "terrorism," "Middle East peace," "human rights," "press freedom," and "U.S. elections."

The U.S. is paying Google based on the number of hits that its ads generate. Currently, that ranges from $25,000 to $30,000 per month for the America.gov website and a further $15,000 for other Middle-East oriented sites. Given that the $15,000 expenditure generates roughly 300,000 hits per month, it seems like a pretty good deal. For that matter, it's worth noting that an internet search platform has become the U.S. government's go-to guy for worldwide advertising. If Google can get people in Saudi Arabia to express an interest in the U.S.'s informational website, it seems like there's little that the company can't do!

Anyone who did not think a Microsoft (NASDAQ:MSFT) buyout of Yahoo! (NASDAQ:YHOO) has become less likely should have stopped by the All Things Digital conference. According to Reuters, "Yahoo Inc Chief Executive Jerry Yang said on Wednesday a potential deal with Microsoft has tremendous power, but the software giant appears no longer interested in a full merger."

The leaves Yahoo! management, its board, and takeover artist Carl Icahn in a tough spot. Many analysts believe that without a deal, the Yahoo! shares could drop back near $20, where they traded before the offer from Redmond. Yahoo! currently changes hands at $27.

The news is a sign that Microsoft thinks it can do almost anything on its own, including challenging Google (NASDAQ:GOOG) in the search business. Gates, Ballmer & Co. have the money to get the engineering hands on board to push better search tech, but user loyalty to Google may be so great that even a much better product from Microsoft will not break its rival's hold on the market.

Microsoft has had success exceeding the market's expectations before. No one believed that the company's Xbox could challenge the Sony (NYSE:SNE) PlayStation franchise.

But, search engines are not game consoles and the rules in one game do not necessarily apply in another.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

Google, Inc. (NASDAQ: GOOG)'s market share in April increased once again, going from 67.25% to 67.90% of all internet searches performed in the U.S. Sounds like a tiny increase, but we're talking hundreds of millions of additional searches here. Even a tenth of 1% is a major increase.

Google also earned the distinction today of being named the No. 1 most-visited site by ComScore, topping Yahoo for the first time.

Both Microsoft Corp. (NASDAQ: MSFT) and Yahoo, Inc. (NASDAQ: YHOO) saw decreases in search market share due to Google's continued dominance. April data from internet traffic research firm Hitwise indicated that Google continues to dominate U.S. internet searches, while being responsible for the lion's share of connecting web searchers with specific industries as well.

For example, 31% of of web traffic and health and medical sites was supplied by Google, as well as 23% of web traffic to travel websites. This alone demonstrates the power Google has over the web. Some industries would see huge decreases in traffic if Google were to go away. In effect, Google's web search dominance has a very broad and meaningful over entire industries on the web, including shopping and classifieds, news and media, entertainment and others.

Still think Google is worth $576.30 per share?

Well that was fast -- in August 2004 Google Inc. (NASDAQ: GOOG) went public at $80 a share and the stock climbed as high as $742 in November 2007, an 828% rise. But since then it's lost 37% of its value and some executives have bailed. The New York Times reports that Google's VP of Engineering, Douglas Merrill, just bolted for a position as president digital at record company, EMI.

But this is not the first of its executive departures. Google has also lost the following:

• In March, Sheryl Sandberg, who was VP for global sales and operations, left to become chief operating officer at Facebook
• CFO George Reyes announced last August that he would retire. At the time, Google said it hoped to find a replacement for him by the end of the year but has yet to appoint a new CFO

Meanwhile, Sys-Con reports that Google's U.S. growth is slowing. In 2007 its click-through rate grew between 25% and 40% but in January 2008 click-through growth was flat and in February click-throughs grew a mere 3%. And it gets worse --plain old Google searches that have nothing to do with paid clicks are also down 5% or 6%. Google attributed the January slowdown to its attempts to improve the quality of clicks and tighten up on accidental clicks.

Yahoo! (NASDAQ: YHOO) may have a better foothold in Asia than any other large internet company. This is driven by its holdings in Yahoo! Japan and Chinese e-commerce company Alibaba. According to The Wall Street Journal, "Depending on how their value is calculated, the stakes account for $9 billion to $14 billion of Yahoo's value."

The valuations are old news. What is not so old is that it is dawning on Microsoft (NASDAQ: MSFT) that having Asian allies may help the company fight off Google (NASDAQ: GOOG) in the fast-growing markets of the Far East. It is something that the world's largest software company does not have now.

The Yahoo! board has a unique opportunity to talk up the strategic value of these holdings with shareholders in public and with Microsoft in private. The prevailing wisdom is that Yahoo! has no alternative other than to sell to Redmond, and that the price is the issue. Yahoo! management should be saying that the Microsoft bid does not take into account the value of having powerful partners in Japan and China and that these are worth several more dollars a share.

It is an argument that has the benefit of being true.

Douglas A. McIntyre is an editor at 27wallst.com.

The numbers are pretty impressive. In 2007, internet advertising grew 25% to $21 billion. But Microsoft (NASDAQ: MSFT) may want to have another look at what it is offering for Yahoo! (NASDAQ:YHOO).

According to The Wall Street Journal (subscription required), internet ad revenue grew 35% in 2006. Between a possible recession and the natural slowing of increases as the dollar base gets larger, overall dollars in this market may only grow 15% in 2008, especially if the recession is deep. That would devalue almost every media company that gets its revenue from internet ads.

Companies such as Google (NASDAQ: GOOG) have driven their stock prices by being able to deliver targeted ads, which are an efficient way to reach clients. Much of the buyout activity for ad-serving firms is to extend the scope of this business.

But, just as the M&A work is done, internet advertising may be hitting an awful headwind.

Douglas A. McIntyre is an editor at 247wallst.com.

Bill Gates says Microsoft (NASDAQ: MSFT) will chase the search business whether it buys Yahoo! (NASDAQ: YHOO) or not. He says that the company's mighty tech arsenal will allow it to improve the efficiency of its search results and that it can take a larger share of the market based on that alone.

"We can afford to make big investments in the engineering and marketing that needs to get done. We will do that with or without Yahoo," said Gates in an interview with Reuters. For a very smart man, Gates sounds dumb.

Microsoft currently has about 11% of the search market in the US. Its global piece is even smaller. Not only does Google (NASDAQ: GOOG) have a much larger share, it is also improving its technology as quickly, if not more quickly, than Redmond.

Gates may have been asked to make his comments to signal to Yahoo! that it will not raise its offer. It only needs the search portal so much. It can reach its goal on its own.

But behind closed doors, Gates knows better.

Douglas A. McIntyre is an editor at 24wallst.com

Though time is on Microsoft Corp. (NASDAQ: MSFT)'s side in its $44.6 billion unsolicited takeover battle for Yahoo! Inc., (NASDAQ: YHOO), that doesn't necessarily mean it will win the war.

The world's largest software company late Monday said -- predictably -- it was disappointed that Yahoo "has not embraced our full and fair proposal to combine our companies" and that it was "confident that moving forward promptly to consummate a transaction is in the best interests of all parties.''

You didn't have to be psychic to see that coming.

But Yahoo co-founder and chief executive Jerry Yang isn't stupid. Microsoft, like News Corp (NYSE: NWS) in its pursuit of Dow Jones & Co. is an uneconomic buyer of Yahoo. Steve Ballmer wants to make sure that Yahoo doesn't fall into the hands of the either Google Inc. (NASDAQ: GOOG) or a media conglomerate such as Time Warner Inc. (NYSE: TWX), parent company of AOL. He has already pledged to pay a 62% premium for a company that many on Wall Street believe has seen its best days.

It is hard to imagine that Google's (NASDAQ: GOOG) share of the search market in the US could get much larger, but in each month it seems to make further gains.

Google piece of search queries increased to 57.7% in November compared with 55.5% in October, according to data from Nielsen Online cited by The Associated Press. . For the big search company to move up that way. Yahoo! (NASDAQ: YHOO) and Microsoft's (NASDAQ:MSFT) pieces of the pie had to move down. And, they did.

The flip side of Google's monthly success story is the talk of Yahoo!'s failure. Its share of November searches dropped to under 18%. At the rate it is failing, the number could be less than 15% by the end of the year.

The story about the failure at Yahoo! is now as old as the hills, but what may happen to its stock price is another matter. Its shares are now below $24 which is near its 52-week low. Search is not all of Yahoo!'s business, but it does rely on the feature to bring in much of its traffic and revenue.

At a 15% share of the search market, what is Yahoo! worth? Certainly not $24. Perhaps below $20. That could be a 50% drop in two years.

Douglas A. McIntyre is an editor at 247wallst.com.

Google Inc. (NASDAQ: GOOG)'s ambition is to become the dominant advertising network across all mediums globally, which is one high mountain to climb. The company has built up a multibillion-dollar cash pile to help it on its quest, and it is in control of the world's internet search market as well as the most-used video-sharing site.

It is dabbling in radio, print, and mobile industries heavily as well. The goal: to take a small cut of each advertising transaction or impression throughout all media forms.

If Google is successful, the company could experience growth way beyond the incredible numbers it's now seeing every quarter. To get there, the company is trying to ensure existing and potential advertising partners know that controlling ad campaigns and directing marketing resources as efficiently as possible would be much easier if there was a central "dashboard" to manage all those ads across all markets and all mediums.

Ever since I was a kid, I've always rooted for the underdog. As a Philadelphia sports fan, you have to be that way or else you will go insane. That's why I've always had a soft spot for Yahoo! (NASDAQ: YHOO).

When others argued that the portal was doomed, I took the contrary position figuring that as more advertising dollars shifted online, the company would get more than its fair share. I figured that Project Panama would make Yahoo's search business at least marginally competitive with Google Inc.'s (NASDAQ: GOOG). Boy, was I wrong. The company's search business continues to suck wind as it loses audience to social networking sites such as MySpace and Facebook. BusinessWeek points out that Yahoo is trying to go back to its geeky roots. While an admirable goal, it may be too little too late.

That thumping sound you just heard was me along with countless others jumping off the Yahoo bandwagon. For the past few months, Yahoo has been sputtering along aimlessly trying to yet again reinvent itself through its 100-day review. Judging from the market's reaction, investors don't have much faith that Jerry Yang and Sue Decker are going to come up with anything groundbreaking. Shares are down $1.01. or 3.6%, to $26.85 ahead of the release of earnings after the close of trading today. They have plunged about 15% over the past six months.

About the only thing that might move the stock is an announcement that it outsourced its search business to Google or that it's considering strategic alternatives including a sale of the company. Yahoo continues to provide good content and knows how to engage users, which would make it a good fit with Microsoft Corp.'s (NASDAQ: MSFT) MSN.

Today's earnings conference call will be lively.