Yahoo Blows Away Google in Time Spent Online, But Fails To Capitalize

As I go over Yahoo (YHOO) earnings data I was happy to see a decent increase in revenues, even if earnings disappointed. However, it does seem that Google (GOOG) looks like the better value (according to First Call, Google has a 2007 P/E of 35 vs. 52 for Yahoo).

Then I came across the following blog entry by Jay Meattle at Compete.com: He shows the top 20 US website usage ranked by time spent on line. MySpace, owned by News Corp. (NWS), comes in first at 11.9%. Second place belongs to Yahoo at 8.5%, four times the amount of time spent on Google (fifth place) at only 2.1%. These kinds of numbers continue to disappoint me in Yahoo's management, who can't seem to monetize such an industry-leading position. My support of shareholder activist Eric Jackson's Plan B to change Yahoo strategy continues as the best way to extract value from Yahoo.

Disclosures and Confessions: I own Yahoo and plan to pledge my shares to the campaign. However, if the shares rise above $35, I'm likely to start selling. I'm short Jan 2008 35 strike calls against half my position of GOOG and am also short Jan 2008 30 strike puts. I do not own Google (GOOG) but have traded it (both short and long) in the last two years. I do not own News Corp. (NWS), nor have I traded it in the past two years.

I like Yahoo!. For years MyYahoo.com has been my browser startup page; I pay to use Yahoo enhanced email; I have over 2000 photos on Flickr; I find Yahoo Finance to be almost as good as Bloomberg, but without the $1800 a month price tag; I have even been using Yahoo's search recently and find it so greatly improved that I don't need Google as much and I have registered websites using Yahoo.

GOOG and YHOO 1-yr comparison chart:

Comments

[akindman:]

If Yahoo! yokes a bunch more ads and pay services to the stuff users are spending a lot of time with, guess what will happen?

2007 Jan 29 10:48 AM

[Sr. Pessimist:]

Where is the Google money coming from? Just because they more successfully capitalize doesn't mean it's sustainable. There's really not much you can do about all the click fraud out there. That's a serious weakness they have. Short-term, they can crank in dough. Long term, Google can be in trouble if they don't satisfy their customers' complaints about return on investment and click fraud. Ridiculous profit margins are not usually believable for a large corporation. This applies to the volatility of hedge funds such as Amaranth Advisors just as it does to a cash cow like Google.

2007 Jan 31 01:49 AM