Continue reading Web browser makeovers and why S&P is bullish on Google

Web browser makeovers and why S&P is bullish on Google originally appeared on BloggingStocks on Fri, 21 Nov 2008 14:45:00 EST. Please see our terms for use of feeds.

Google (NASDAQ:GOOG) and Yahoo! (NASDAQ:YHOO) still want their deal for the large search engine company to sell search advertising for the large portal company. Yahoo! knows that Google's system for selling these ads is more efficient. Yahoo! should make more money under the arrangement.

But, almost every large advertiser in the US and Google's competitors want to block the partnership. They don't want Google to have broad pricing power over search. It has about 65% of the market and Yahoo! has another 20%. According to The Wall Street Journal, "Advertisers have told Justice Department officials that the partnership will limit competition, raise prices and reduce choices."

The Justice Department, which has to review whether the deal works under antitrust laws, is getting itchy.

So, what happens? If Google has any sense, it will throw Yahoo! under the bus and walk away. Google stands to get in real trouble with Justice if the government decides to look at the company's share of search even without the Yahoo! deal. It is better off leaving quietly. Google is not likely to make a huge amount of money from selling ads for Yahoo! since the money will be split between the two companies.

Yahoo!, which is struggling to improve revenue and with its stock near a 52-week low, needs the new sales from Google. And, if the larger company exits the deal, Yahoo! has a major problem.

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

Google (GOOG) and Yahoo! (YHOO) try to dodge Justice Department originally appeared on BloggingStocks on Tue, 14 Oct 2008 10:15:00 EST. Please see our terms for use of feeds.

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.

As Yahoo! hits a five-year low, bets about direction increase originally appeared on BloggingStocks on Fri, 05 Sep 2008 10:00:00 EST. Please see our terms for use of feeds.

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.

Online ad trend get worse for Yahoo!, newpapers originally appeared on BloggingStocks on Thu, 04 Sep 2008 10:03:00 EST. Please see our terms for use of feeds.

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.

Yahoo! goes after Google with new search tool originally appeared on BloggingStocks on Thu, 10 Jul 2008 10:57:00 EST. Please see our terms for use of feeds.

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.

Microsoft (MSFT) to give up on buying big web companies originally appeared on BloggingStocks on Fri, 20 Jun 2008 09:57:00 EST. Please see our terms for use of feeds.

The United States of Google originally appeared on BloggingStocks on Wed, 11 Jun 2008 09:38:00 EST. Please see our terms for use of feeds.

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.

Microsoft (MSFT) and Yahoo! (YHOO) talk down deal in public originally appeared on BloggingStocks on Thu, 29 May 2008 08:43:00 EST. Please see our terms for use of feeds.

Google's search marketshare inches forward in April; also named most-visited site by ComScore originally appeared on BloggingStocks on Thu, 15 May 2008 10:22:00 EST. Please see our terms for use of feeds.

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.

Continue reading Has Google peaked?

Has Google peaked? originally appeared on BloggingStocks on Wed, 02 Apr 2008 10:10:00 EST. Please see our terms for use of feeds.

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.

Microsoft may have to up Yahoo!'s bid due to Asia holdings originally appeared on BloggingStocks on Wed, 27 Feb 2008 10:35:00 EST. Please see our terms for use of feeds.

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.

Internet ad growth slowing originally appeared on BloggingStocks on Tue, 26 Feb 2008 09:22:00 EST. Please see our terms for use of feeds.

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

Gates: Microsoft (MSFT) will chase search no matter what originally appeared on BloggingStocks on Tue, 19 Feb 2008 08:40:00 EST. Please see our terms for use of feeds.

Continue reading Microsoft gaining support from Yahoo shareholders

Microsoft gaining support from Yahoo shareholders originally appeared on BloggingStocks on Tue, 12 Feb 2008 09:57:00 EST. Please see our terms for use of feeds.

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 (GOOG) picks up more search share originally appeared on BloggingStocks on Fri, 28 Dec 2007 10:00:00 EST. Please see our terms for use of feeds.

Google Inc.

Continue reading Google aims to be one-stop shop for advertisers

Google aims to be one-stop shop for advertisers originally appeared on BloggingStocks on Wed, 05 Dec 2007 18:42:00 EST. Please see our terms for use of feeds.

Why I jumped off the Yahoo bandwagon originally appeared on BloggingStocks on Tue, 16 Oct 2007 13:37:00 EST. Please see our terms for use of feeds.

Google (NASDAQ:GOOG) has been a target for a number of internet privacy groups who feel that it keeps personal data on users for too long. Google argues that having the data helps deliver better search results. Plus, the company decided to cave into pressure and agreed to keep data on individuals no longer than 18 months.

Now, Google want to be out in front of the drive for Internet privacy. It is an unlikely about face, but it is one nonetheless. According to the Financial Times, Google is "calling for new international laws to be set up to protect personal information online." It wants a body like the UN to draw up the rules.

Google's position is clearly one that it would rather not be forced to take, but it is making the best out of a bad situation. Clearly, the more data a search engine has, the better the results. This allows for better text ad targeting and better profits. Now that Google has purchased DoubleClick the use of data collected from users is even more important to get good results for display ads.

But, Google has to protect its image and so instead of just going along, it will lead the parade.

The company may figure that if it take a central position in drafting new rules so that it can at least slant them a bit to its advantage. It is not being helpful for nothing.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Google becomes unlikely advocate for web privacy originally appeared on BloggingStocks on Fri, 14 Sep 2007 13:30:00 EST. Please see our terms for use of feeds.

Google (NASDAQ: GOOG) is betting that search on wireless handsets will become a big business. The company understands that online search on the PC platform cannot grow at its current rate forever, so, at some point, revenue from its AdWords program will begin to flatten.

To combat the potential of a less robust growth environment on the web, Google is moving Adwords onto its Google Mobile Search product. The program will be free until November and ads will only run on websites designed for handset screens.

Silicon Alley Insider points to a recent survey by research firm Kelsey Group as the reason Google is so anxious to get a foothold in the new market. "Revenue from U.S. mobile search advertising will soar from $33.2 million this year to $1.4 billion in 2012."

Google has some potholes in its path. After being handily beaten in the PC-based search market, Yahoo! (NASDAQ: YHOO) and Microsoft's (NASDAQ: MSFT) MSN Live Search are working to get their products on as many handsets as possible. However, they still have the disadvantage that their search products do not produce results as good as Google's and their text ad targeting products are inferior.

In moving to the mobile platform world, Google maintains its critical edge.

Google (GOOG) to move AdWords to wireless search originally appeared on BloggingStocks on Wed, 12 Sep 2007 09:49:00 EST. Please see our terms for use of feeds.

According to the Wall Street Journal, Yahoo! (NASDAQ: YHOO) gave serious consideration to outsourcing its search function to either Microsoft (NASDAQ: MSFT) or Google (NASDAQ: GOOG). The paper writes: "Such a move would likely give Yahoo an immediate revenue bump representing hundreds of millions of dollars annually, because Google, for one, generates about 40% more revenue for each consumer search than Yahoo! ..."

Yahoo! has spent a huge sum on developing its own Panama technology to improve its competitive position with Google, but there is not much evidence that this program has worked well. Another quarter or two of bad results could send Yahoo! back to Google to pick up the additional revenue.

The idea that Yahoo! would turn to a rival for its key search function shows how badly off the company is and how little management may be able to do about it. When Yahoo! decided not to make search a major part of its business, before Google had become a big company, it sealed its fate as a display advertising company, but the display market is no longer growing quickly.

Not matter how much pride Yahoo! would have to part with to set up a partnership with Google for search, it should do so. It needs the revenue and Wall Street needs a revival of the stock.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Yahoo! (YHOO) should outsource search advertising to Google (GOOG) originally appeared on BloggingStocks on Mon, 10 Sep 2007 08:49:00 EST. Please see our terms for use of feeds.