Yahoo (NASDAQ:YHOO) is a massive Internet related conglomerate, raking in $4.98 billion in revenue in 2012 and recently shaking up their executive team, appointing Marissa Meyer (who, for bonus points, looks sultry in the new Vogue) as CEO and president effective July 17, 2012. She was brought on primarily to help with Yahoo's sales, which have tapered since 2008.
Google (NASDAQ:GOOG) is another major technology conglomerate that is slowly, but surely taking over the planet as we know it. A majority of Google's revenue comes from their advertising. Recently, Google has been developing their wearable eyewear, Google Glass, alongside other "ecosystem"-like products: Chromecast, Google Fiber, and their mobile Android operating system.
Yahoo and Google have a couple of things in common. They're both extremely popular web portals, they both offer services like financial news and e-mail, and they both are trying to dip their hands in social media. Both sites offer world maps, directions, and image/video specific searching.
Owners of both stocks have had lucrative runs through 2013 thus far. Yahoo is up nearly 85% in the last twelve months, and Google is up about 29% for the past year.
Recent news is starting to pin the two of these companies closer together in competition than they deserve, in my opinion. Google has the upper hand as a company for three major reasons that I'll get into here. This article was spurred by a CNBC.com report that came out Thursday morning.
It was reported Thursday morning, by CNBC.com that Yahoo overtook Google, for the month of July, in total unique visitors:
So what was the most popular U.S. website last month? Not Google (sort of).
Turns out that Yahoo had the most unique monthly visitors in July, beating even the search king. And that didn't even include numbers for Yahoo's newly acquired Tumblr blogging site, which came in 28th place on rankings from comScore.
Yahoo had 196.6 million monthly uniques versus Google's 192.3 million for Google. However, the numbers do not include mobile usage and visitors are only counted once in a month, no matter how many times they return to the site.
It is this analysts opinion that unless we start to see reports like this for more than one month in succession, this is likely to be considered an aberration and a small bump in the road for Google, who I'll argue will inevitably be the success story of the two companies in the future. It is, however, the first time this metric has been favorable for Yahoo since 2011. Here's my three main reasons behind my hypothesis that Yahoo can't touch Google:
1. Google's Cash Stash With the Right Attitude
A company with over $50 billion in the bank, like Google, is basically free and clear to do whatever they want, whenever they want.
Google, which had $48.1 billion in cash and short-term investments at the end of 2012, wants to retain its "strategic ability to pounce," Pichette said at a Morgan Stanley conference. He cited the company's ability to move "on a dime" when it agreed to buy Motorola Mobility Holdings Inc. for about $12.5 billion in cash in 2011.
Pichette discussed the question of cash as Apple Inc. (AAPL) is under increasing investor scrutiny over its $137.1 billion in cash and investments, facing pressure to return more to shareholders. Google regularly reviews its use of money with the board to ensure it's being managed best for shareholders, Pichette said.
"For now we feel very comfortable with our position," Pichette said. "We don't have religion about cash and hoarding cash. Google doesn't have this view that it will keep all its cash for eternity."
Not only is this a ton of cash, it's the right attitude to have about it. I'm sure everyone's familiar with Apple's recent cash fiasco, where hedge fund investors in the company were demanding that the company use some of their monstrous cash position to pay out goodies to shareholders. It seems like Google has the attitude where they would not be opposed to that going forward, which shows that they have perspective and that the company is a good potential investment going forward.
Aside from that, Google's cash position simply dwarves that of competitors. Yahoo, according to YCharts, has cash and short-term investments of $2.629 billion.
2. Google Is Going to Be an "Ecosystem" Company
This is something that I've written about in a few articles, and a major leg up that Google is going to have over Yahoo.
The "ecosystem" I refer to is in regards to the lifestyle of electronics - companies like Google and Apple (NASDAQ:AAPL) venturing way out from simply computers to different products that you'd incorporate in your daily "ecosystem". Google, in doing this, is really going head-to-head with what Apple is trying to do; essentially the same thing. We're going to see these two titans of the tech industry go at each other for many years to come - Yahoo is currently not participating in the "ecosystem" play, and is watching from the sidelines.
In creating Glass, Google Fiber and Chromecast, Google is tipping their hand that they are definitely going to be moving in the same direction of lifestyle products that Apple is working on as well.
When you invest in tech companies like Google and Microsoft (NASDAQ:MSFT) in the future, you're going to be investing in companies that are competing to feature their operating systems not only in your computers, but in your lifestyle.
CNBC.com reported on this earlier in the year:
"This is more about the ecosystem play, giving people access to Google's platform at a throw away price," Milanesi said. "It's the lowest cost part that people can buy that gets them into the Google ecosystem, and long term that's where I see the danger being. The question is going to be how else is Apple going to attack the living room."
While there is a lot of speculation that Apple will roll out a television set, Mianesi said she envisions something slightly different.
It doesn't make sense for Apple to roll out a television set in the traditional sense because of how large the TV market is, but the company will reinvent the way consumers think about television with some sort of new screen experience, she said.
"I think there will be a phase that will come where Apple's TV box will mutate into something else," she said. "I think we are expecting more to come from Apple that will take that TV business to a different level-some hardware related to a screen that is more of an entertainment device."
Yahoo hasn't entered into the "ecosystem" area - yet. Potentially, they could in the future and it's likely that they will. For now, however, Google is already ten steps ahead in this regard.
3. Yahoo!'s Branding is Dated and Old, Google is New & Hip
People bring this up as a non-argument sometimes, but this is a legitimate negative quality for Yahoo in this investor's opinion. Like the many Internet names that were around years ago and have gone defunct or semi-defunct, Yahoo is part of a group of companies whose branding and name are so old that younger generations aren't going to take to it. This investor would guess that a majority of Yahoo's users make up an older crowd, while Google likely has a stronger foothold on the younger generations.
Think about the archaic names of the internet past: America Online (NYSE:AOL), Netscape Navigator, Hotmail, Microsoft's Internet Explorer - all services or companies doing only a fraction of the business that they previously were.
This is the same argument I made previously about both J.C. Penney (NYSE:JCP), Sears (NASDAQ:SHLD), and RadioShack (NYSE:RSH). They are all old brands that, sans any type of re-imaging/renaming/rebranding, are likely to go the way of Eastman Kodak (EKDKQ.PK).
My conclusion here is not to be fooled by the news reported today that Yahoo has overtaken Google in unique hits. Again, it's likely to be an aberration. Yahoo can't touch Google, in any aspect of their business. Fueled by a great cash position, an emerging market of ecosystems to tap into, and younger generation friendly branding, Google remains the investment of choice between these two companies. Good luck to all investors.