Yahoo News Incorporates Blogs; Implications for Internet and Media Stocks (YHOO, GOOG, MSFT, IACI, NYT, TWX, CNET, TSCM)

Last week Yahoo began to incorporate blogs in its news search. Because navel-gazing bloggers tend to be far more interested in blogs than investors, I'll keep the analysis to two short short points and the stock implications:

1. It's about time sensitivity, not blogs

The search companies -- Google, Yahoo and Microsoft -- know that they need to do a better job of searches for time sensitive information. There are two challenges to getting that right. First, time sensitive web sites need to be crawled more frequently than static web sites, but it's not yet possible to crawl the entire Web every three hours. So the search engines need to segment web sites into more time sensitive sites and less time sensitive sites. And second, the search engines need to discern whether a search is for time senstive material or not. That's not so simple: a search for "hurricanes in the US" a year ago was a search for very different material than the same search performed a day after Hurricane Katrina.

The solutions so far:

• Google has kept "blog search" separate from Google News and the main Google search service, and has opted to classify sites as time sensitive if they have an RSS feed, irrespective of the popularity of the site.
• Yahoo has incorporated time sensitive sites (aka blogs) into its News Search, and seems to have used subscriptions to My Yahoo as the determinant for inclusion.

Prediction: Within a year both Google and Yahoo will be doing a better job of incorporating time sensitive web sites into their general search, and distinguishing searches for time sensitive material.

2. Search is a hook for stickiness

Until recently sticky services such as web email and personalized home pages drove traffic to search. Yahoo, for example, stated on its conference calls that it would offer contextualised search on all its content pages, and My Yahoo obviously has a search box. Similarly, Google's desktop search, RSS aggregator and web email attempt to get a Google search box permanently in from of the user.

Note that the relationship was one-way: the sticky service drives search usage (because search is where the money is?).

But now that's changing. As Google and Yahoo battle for sticky users, Yahoo is using search to drive usage of My Yahoo. Yahoo News Search allows users to easily add sites that come up in search results to their My Yahoo page. Here's an example: Yahoo News Search for "GOOG".

Question: Which will prove more successful: Yahoo's use of a proprietary and manual RSS subscription mechanism ("Add to My Yahoo"), or Google's automated subscription mechanism (Google Sidebar automatically subscribes you to frequently visited sites.)

Stock implications:

• YHOO: incrementally positive. YHOO is keeping up with Google in search technology and will drive further adoption of My Yahoo.
• GOOG: incrementally positive? Paradoxically, Yahoo's promotion of blogs may actually help Google. Why? Because the most popular advertising platform for bloggers is Google's AdSense for Publishers. So more traffic to blogs means more revenue for Google. Yahoo, meanwhile, seems to be taking a long time to release its own contextual advertising service.
• NYT, TWX, CNET, TSCM and other established media content providers: incrementally negative. Further increases visibility of, and therefore competition from, blogs and other smaller content providers.
• IAC: incrementally negative. As GOOG and YHOO use their clout to integrate search and sticky web services, search players lacking the full suite of tools look increasingly vulnerable. IAC acquired Ask Jeeves and (therefore) Bloglines.

Related:

• Four Stock Implications of Google Blog Search (GOOG, IACI, MSFT, YHOO)
• Google takes aim at My Yahoo
• Yahoo readies publisher tools to compete with Google (YHOO, GOOG)
• All Internet Stock Blog articles on Google, Yahoo, IAC, Microsoft.
• The complete list of stocks (and links to articles about them) covered by The Internet Stock Blog.

Full disclosure: short CNET and TSCM at the time of writing. « Any opinions expressed on the Seeking Alpha sites are those of the individual authors and do not necessarily represent the opinion of SeekingAlpha or its management. »