Is Yahoo Losing Out to Google?

Dennis Faas's picture

Google's newest billion-dollar deal with online video innovator is the latest in a series of attention-grabbing headlines that feature the prominent search engine giant. These headlines are no doubt benefiting Google, but may be forcing the company's rivals to loose their competitive edge.

And no competitor is feeling the heat as much as Yahoo. Yahoo, a veteran of the online world, and still very popular, and is currently battling perceptions (and possibly realities) that it is continually being beaten by Google.

The past quarter has been financially devastating for Yahoo. In July, the company announced that their long-anticipated improved search ad system, Project Panama, would be delayed until next year. As such, Yahoo's stock prices have fallen from $32.24 to $25.20 per share. (Source:

By contrast, Google's stock prices have increased by three percent so far this year.

Says David A. Utter from, "declining ad sales in the finance and automotive markets, a delayed launch of a new contextual ad service, and splashy acquisitions by Google have left Yahoo feeling like the last grape in a wine press." (Source:

During this past summer, Google has continued to increase its dominance in the profitable search engine market -- which can be attributed as the main reason for the eight-year-old company's growing worth of $130 billion.

Also fostering the company's competitive edge is the recent advertising alliance with a social networking site that is already competing with Yahoo for the most viewed Internet site. (Source:

Standard and Poor's Analyst Scott Kessler says, "It has been an amazing contrast ... Google seems to be out-executing and out-innovating Yahoo."

Although Yahoo declined to comment about Google's YouTube acquisition, Yahoo Chairman Terry Semel is confident that his company is well positioned to profit from the entertainment and advertising industries' move to online business. Even though Yahoo may be playing second fiddle to Google in some regards, the company is still making plenty of cash -- a $324 million profit on revenue of $3.1 billion in the first half of 2006. (Source:

However, for Yahoo to keep turning a profit, and for the company to remain competitive with Google, investors and analysts believe that Yahoo will have to come up with something pretty spectacular. Kessler notes that "with [Yahoo's] shares close to their 52-week low, we believe the pressure is significant for Yahoo to do something meaningful to garner positive interest and restore investor confidence." (Source:

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