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Thursday, March 08, 2007

Bad News for GOOG and MSFT

Went to check out the updated Google Finance and 2 headlines caught my eye (both from Red Herring):
  1. Is YouTube a Google-Sized Distraction?
  2. Microsoft Search Exec Resigns
Both would seem to indicate good news for Yahoo! (YHOO) shares. There's more coverage on the MSFT story from Search Engine Roundtable and this Seattle newspaper. I wonder if the Microsoft search executive leaving is an indication of an internal problem at Microsoft or simply a matter of him finding a better option externally. Either way, this cannot be good news for MSFT stock. Search marketing and contextual advertising is where the money is these days (at least in terms of growth). I don't think this is going to help Yahoo! as much as people think. They have their own internal problems. Consider this quote from the above story about Google and Youtube:
Some observers are now worried that top executives are becoming increasingly distracted by YouTube, just as chief rival Yahoo appears to be regaining its footing by revving up its new “Panama” search-advertising system.
The media seems to be all over this "Panama" story. What they seem to be missing is that fixing the PPC advertising platform on the back-end doesn't help YHOO with their front-end problems. They have 2 serious problems:
  1. They need to increase ad distribution for both search and contextual ads
  2. They need to decrease reliance on parked domains and 2nd tier search engines
Google has greater market share, both in terms of search engine advertising and contextual advertising (AdSense). How does Panama help Yahoo! distribute more ads? It doesn't. It helps advertisers create more ads. That's all. It doesn't improve ad distribution. In fact, their existing ad distribution network has too many low quality partners.

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