Most investors are probably laughing at the title… How could Yahoo ever grow as fast as Google? Quite simple really. Google has become the fat kid who is going to have one heck of a time if he wants to continue to double in size. Enough of the bad analogies though.
Google’s market cap is $214.40 B. Yahoo’s market cap is just $31.86 B. Who can double shareholder value easier?
Google is a great company, don’t get me wrong. The company has done some remarkable things and they have a good (it ain’t perfect) search system. I’m not saying Google ain’t a good investment. I like Google, but it gets way too much of the attention and fanfare in the internet arena. Google has some great growth opportunities and is turning into a media empire, but to continue posting amazing growth rates will become increasingly difficult. Even with Google jumping into the alternative energy arena (which I applaud!) Google’s growth rates in percentage terms will begin to slow.
For those investors that want to continue to see extremely fast growth rates, I encourage you to step back and take a look at some of the upside potentials Yahoo has to offer:
- Yahoo is still the most popular website on the internet.
- The internet advertising arena will soon overtake the TV advertising industry in terms of size. The internet is growing by leaps and bounds around the world and the money is following - and Yahoo is one of the best choices for advertisers looking to spend money online.
- Yahoo has been doing “bad” during the last several years. Define bad: It only grew revenues from ~$3.57 B in 2004 o ~$6.42 B in 2006. Yes, net income fell to just $751 million in 2006 from a high of $1.896 B in 2005. The beautiful thing is that the company considers these results REALLY bad and is working double time to make changes to ensure results improve (Most companies have to lose money before they consider the results really bad…not Yahoo!).
- You can buy Yahoo shares as cheap today as you could several years ago and yet during that time Yahoo has grown and earned money.
- Yahoo’s Publisher Network has yet to be released from beta testing. This program will be Yahoo’s version of Google Adsense. For those of you that don’t know, a large percent of Google’s earnings actually come from its network of publishers that place Google’s Ads on their websites (See Nabloid.com for Example of Google Ads). Yahoo’s Publisher program is currently in beta and only accepts U.S. based publishers. Many of those publishers have indicated they earn A LOT more money with Yahoo than they do with Google. As a result, a lot of webmasters are just itching to try Yahoo Ads on their site and compare the results against Google Adsense. Right now Google has a monopoly on all international publishers. When Yahoo releases the program from beta, thousands upon thousands of websites from around the world will begin to use Yahoo. I’m not saying Yahoo will be bigger or better - but it will increase Yahoo’s earning capabilities. This is one of the biggest upside potentials for Yahoo and its shareholder’s.
- Video advertising is just beginning to become popular online - but you can bet it will help increase the online advertising revenue rates! Yahoo has a lot of top quality content that is perfect for advertisers.
- Yahoo is still innovating! Look at the amazing success Yahoo Answers has become! Launching a program like that is a relatively cheap undertaking (most of the content is user generated!).
- Yahoo has a new CEO and most leadership roles have changed. Yahoo’s co-founder (and a large shareholder) is now taking an active role. He wants to get the company back on track and focused.
- Yahoo! can easily launch other new products and services that will complement the brand (forums, content sites, Project Panama, etc).
- Yahoo! can continue to acquire other successful online businesses.
Yahoo has a lot of things going for it. It is lean, profitable, successful, and determined to be more innovative. Watch out for a focused Yahoo that is determined and has something to prove. My bet is that Yahoo WILL grow faster in percentage terms than Google.
I’d love to get my hands on some shares or some of those long term Jan 2010 $20 Call Options.
Full Disclosure: The author does NOT own shares in YHOO or GOOG at the time of writing this article.