Can Yahoo! Really Give Google A Run For Its Money?

December 26th, 2006 - - Filled in: Business/Consumer

According to an article in BusinessWeek today, “the Web’s most visited site lags Google by billions in advertising revenue, and it’s going to take more than its new ad-delivery technology to close the gap”. Well, maybe so. But its about time someone ponies up against the ad giant.

It’s difficult to put a dollar figure on how much Yahoo stands to gain from Panama because the company does not reveal how much of its overall advertising revenue comes from search. Using data on total search queries, released by comScore, Caris & Co. analyst Tim Boyd estimates that Yahoo made on average between 10Â¢ and 11Â¢ per search in 2006, bringing in a total of $1.61 billion for the first nine months of the year.

Microsoft has its own ad network in the works. TechCrunch wrote an excellent post about it back in August.

Both articles allude to Yahoo!’s “catching up to do”. Google sealed a deal in August to advertise on Myspace while Microsoft did the same with Facebook. That’s 100 million and 9 million users respectively. That’s alot of eyes on your ads. As I mentioned in my post about “Where To Invest In 2007″ (Yahoo! is one of the companies recommended by SmartMoney Magazine), good news is that advertising is expected to grow 20% annually for the foreseeable future. According to research discovered Daniele Guerini on seekingalpha.com, Yahoo generates $0.04 per US search vs $0.11 at Google. Panama could definitely help reduce the gap significantly. A reduction of the gap to a more reasonable 30% discount [$0.077 per search] would generate approximately $800M of extra revenues based on the number of searches…revenues generated at no extra cost.

I’ve got my popcorn ready…this should be an interesting year in the battle for ad dollars.

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