While Internet advertising continues to explode, the profit of Yahoo, the company that owns the world's most visited Web destination, plunged by a massive 38% in the third quarter compared to the same period last year. The poor result has not only sent shockwaves throughout the investment community by also prompted some soul searching at the highest levels within the company.
Although revenue for the quarter was up by
nearly 20% over the previous corresponding quarter, it was way behind
the general advertising growth rate, prompting an immediate perception
that Yahoo was slipping further behind search leader Google in the
advertising stakes.
Yahoo and Google are two different kettles of fish despite their competition for the online advertising dollar.
Yahoo, one of the original web sites, is the king of content, providing
news, information and entertainment, as well as a variety of
communications services, such as search, email and instant messaging.
The rich variety of content and services on Yahoo's pages make it the
most highly trafficked site on the web, enabling it to build an
advertising business around the content. It's a traditional
advertising model, abeit online.
Google, as well as being a search engine provider, is a content
aggregator and is building a web services business, providing not only
email and messaging, but a range of online applications, such as Google
Maps, Google Earth, online office productivity tools and others.
However, its main sources of revenue come from search engine marketing
and ads served to publisher's websites. Google dominates in these areas.
A quick comparison of the results of the same query entered into the
search boxes of Google and Yahoo will illustrate the difference between
the two rivals. Typing in sports cars will reveal a variety of
sponsored links in both cases. However, try typing in something a
little more specialised like camping gear and the difference becomes
clear. Google simply outstrips its rivals. The same thing holds true
for context sensitive advertising on publisher's websites.
Yahoo is trying to improve the search engine marketing side of its
business but, like Microsoft, can't seem to keep pace with Google.
Thus, Yahoo's advertising revenue continues to grow mainly as the
traffic generated by its content grows. Google's revenue grows in
proportion to the number of Google search queries plus the number of
Web publishers that carry Google Ads on their sites. There's no prizes
for guessing which is growing faster. {moscomment}
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