MediaVidea

How Yahoo can still close the gap with Google

The secret ingredient is no secret anymore: If Yahoo can somehow efficiently monetize its Paid Search Business, which is Google’s cash cow.

Google’s market capitalization is roughly 3 times that of Yahoo ($132 bn. Vs. $34 bn.). The two companies’ cash position is almost in the same ration ($11.6 bn vs. $3.5 bn., according to some sources).

Advising people to go long on Yahoo and to short Google’s stock, Seeking Alpha cites a research that showed that Yahoo generates $0.04 per US search vs $0.11 at Google.

Seeking Alpha says that this amounts to almost 65% discount! It says that if Yahoo’s Project Panama [placing ads based on price and relevancy of ads] succeeds, that could significantly reduce the gap vis-à-vis Google.

It says:

A reduction of the gap to a more reasonable 30% discount [$0.077 per search] would generate something like $800m of extra revenues based on the number of searches in IIIQ 06.

Optimizing its Paid Search business (just like us bloggers have to optimize our pages for search) will benefit Yahoo more than its other good features – namely, a more balanced portfolio of ads inventory including CPC, cost-per-thousand [CPM], cost-per-ad [CPA] and video advertising, being chockfull with Web 2.0 beauty (Flickr, Del.icio.us, Yahoo answers, MyWeb et all).

If Yahoo succeeds in making Project Panama work, it will also mean that Google is a one trick Pony after all.

posted by Pramit Singh @ 4:04 PM