As you may have heard, Jerry Yang has been sacked by the Board of Directors at Yahoo (YHOO) from his position as CEO. Ok so maybe the official verdict is that he "stepped down". Regardless, he hurt Yahoo more than he helped it. During his 18 month run as CEO, he turned down a lucrative Microsoft (MSFT) bid for $32 per share, and could not forge a deal with Google (GOOG). Shares of Yahoo now languish at around $10, struggling to stay in double digits.
So what now? Yahoo has been and remains the most heavily trafficked online portal with over 142 million unique visitors in October 2008 according to comScore. That is 2 million more unique visitors than Google. On average, Yahoo visitors spend just under 5 hours every month on Yahoo. Google on the other hand cannot hold on to their visitors for more than an hour. An average Yahoo visitor browses more than twice as many pages on Yahoo than the average Google audience does on Google. Finally, Yahoo users spend 4 times the amount of minutes per visit than the average Google user. Yahoo even has higher loyalty among their users with more repeat visits than Google and ranks #1 on Alexa (an internet domain ranking service) and comScore.
So why is Google eating Yahoo's lunch. What makes Google so much better? Well, for one, technology. Google's search has more muscle than Yahoo's. Having said that, Google is not considered a media property. It is primarily a search engine and a darn good one at that. But once people find what they need, they leave. On the other hand, while Yahoo's search algorithm leaves much to be desired, it has evolved into a full fledged media giant. According to Chrysler, a home-page buy on Yahoo is worth 75 TV ratings points -- the equivalent of four 30-second spots in a hit prime-time show.
Lets consider some of Yahoo's properties and the clout they have in the market place.
Yahoo Mail - 47% of the internet audience, followed by 23% each for Microsoft and AOL. Google is a distant 4th with 15% (many users have multiple email accounts so they would be counted under multiple domains). It also has the highest number of average minutes logged by its users and the highest number of average repeat visits.
Yahoo Answers - second only to Wikipedia in the
Yahoo Video - overtook MySpace TV to become the second largest video site behind Google's YouTube in September.
Flickr - ranks third after Facebook and Photobucket, with double the number of unique visitors than its fourth place rival Picasa.
Yahoo Finance - is the top ranked financial research website with total minutes spent on Yahoo Finance is more than twice any of its competitors. Google isn't even a major player here. TechTicker, the video channel on Yahoo Finance, gets 450,000 views a day, comparable to CNBC.
Yahoo Hotjobs - ranks third behind Careerbuilder and Monster.com.
With all this, Yahoo has made a mess of monetizing its properties. According to Advertising Age, Aimee Reker, senior VP-global director of search for MRM Worldwide, believes Yahoo shares are undervalued, noting that not only does Yahoo have scale, it has scale against its own content. Indeed, for all its recent efforts, Yahoo missed the boat on search and social networking, but it remains the dominant player in online display advertising.
Earnings have continued to disappoint at Yahoo. Many talented employees have also deserted the mother-ship. The company has not had any success in forming partnerships with the Facebooks or the AOLs of the world either. Yet, $10 price tag and a market cap of less than $15 billion seems to be a bargain considering that 12% of all time spent on the internet is spent on Yahoo.
With the news of Jerry Yang's departure as CEO, Yahoo may see some life yet. I recommend buying Yahoo at current levels.
Full Disclosure: I own GOOG but do not own YHOO, however, my position can change anytime without notice.