Wednesday, April 9, 2008

Yahoo Tests Outsourcing Search To Google

In what could be considered the ultimate white flag of surrender Yahoo has agreed to begin using Google's Adsense for search to help boost it's revenue and fend off an increasingly hostile Microsofty. Even though this test is small at only 3% of search queries in The United States, just the fact that Yahoo is considering such a move shows you how much of a lead Google has on Yahoo's ad platform.

Analysts have been suggesting Yahoo try out this partnership a long time ago, and that Yahoo could actually benefit as Google generates more money for each search query, and has superior results. Google meanwhile managed to continue it dominance in search by gaining an amazing 67% of all US searches according to Hitwise, and most say that numbers for the world are even greater!

So, what does this mean for "low" Google's share price? Well, they report earnings on April 17th, next Thursday so I would say if you don't have a position already, I would be waiting on the sidelines till after the earnings report, or perhaps just dip your toes in the water and buy a little bit. Google's stock price has been hammered along with most of the Nasdaq this year falling from as high as $747 on the G-phone rumors.

The economy could weigh on Google's results this quarter, but I think that long-term Google will be one of the best investments in the Tech Sector. Microsoft is looking increasing desperate with it's very generous offer to buy Yahoo to form... uh Microhoo I guess. Yahoo, is meanwhile being distracted by this offer as their employees fear for what may be coming tomorrow.

Google on the other hand continues marching on... gaining market share and implementing quality controls to their ad platform that will in the end produce better results, and higher revenues.

That being said, if they miss the numbers the stock will drop, possibly even quite dramatically. If this is the case though, I will certainly be adding to my position as a slowdown in the economy can only last so long and Internet advertising will continue to grow for years and years to come as consumers increase their consumption online adding to Google bottom line. Plus, the Google Checkout Effect should help in the future as they compete with the entrenched Paypal and Google's new App Engine will add to their revenues as well once they start charging for it.

What are your thoughts on company's coming earnings report and it's long term prospects?

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