Yahoo Seals The Deal With Google

It is final, Google (goog) has official one the search engine race. Some people might think they had already won it, but with the announcement from Yahoo today that it will begin running even more Google ads with it search results, it's over. This will certainly be good for Google's stock price, which has lost a bit of steam after even it's last earnings jump. Obviously, the test that Yahoo was running with Google went well and this should be a win-win for both companies. They have also decided to link up their instant messages services, in another sign that they plan on becoming even tighter in the future. Sorry Microsoft! Here is the press release...

Google (Nasdaq: GOOG) today announced that it has reached an agreement that gives Yahoo! the ability to use Google's search and contextual advertising technology through its AdSense™ for Search and AdSense for Content advertising programs. Under the agreement, Yahoo! has the option to display Google ads alongside its own natural search results in the U.S. and Canada. In addition, Yahoo! can serve contextually targeted ads on its U.S. and Canadian web properties as well as on its current publisher partner sites. Yahoo will continue to operate its own search engine, web properties and advertising services.

In addition, Yahoo! and Google agreed to enable interoperability between their respective instant messaging services bringing easier and broader communication to users.

"This commercial agreement provides Yahoo! with the opportunity to deliver more relevant ads to users and provide advertisers and publishers with better advertising technology to help them succeed in their own businesses," said Eric Schmidt, Chairman and CEO of Google. "This agreement will preserve the competitive and dynamic online advertising space."

As a result of the agreement, Yahoo! will be able to complement its own advertising program with Google’s advertising technology. As a result, advertisers will be able to better reach consumers, and Yahoo! and its current publisher partners can generate more revenue. Yahoo can use Google's advertising technology on as many or as few of its search results and content pages as it chooses.

This non-exclusive agreement allows Yahoo! to enter into similar agreements with other advertising providers. In addition, Yahoo! will maintain relationships with its own advertising customers and will continue to rely exclusively on its own advertising program outside of the U.S. and Canada. The agreement has a term of up to ten years: a 4-year initial term and two 3-year renewals at Yahoo!’s option. Financial terms between the two companies were not disclosed.

Although Google and Yahoo are not required to receive regulatory approval of the arrangement before implementing it, the companies have voluntarily agreed to delay implementation for up to three and a half months to give the U.S. Department of Justice time to review the arrangement.

Take a look back at all our Google posts here!

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?

The Real Winner Of Cyber Monday Is...

With all the talk of retailers having to cut prices and in turn suffer though lower profit margins, shouldn't we be focusing on the bigger picture here? The mighty Google is the one directing a ton of traffic to all these different sites this holiday season. Not only that, but a smarter consumer that is looking for bargains is going to be more inclined to click on an ad or two while looking for the perfect price on a product. The more people that search for all these high tech gadgets and anything else they are looking for on the net the better...

More traffic = More Searches = More Money For Google

But wait there's more, in case you missed it Yahoo's server's weren't working for part of the day. Customer's couldn't even complete transactions through Yahoo on this all important Cyber Monday! Imagine all of those retailers that are going to come running over to Google Checkout... what better reason to switch then to have Yahoo let you down on one of the biggest days of the year! So guess where all those potential customer's went? That right, straight over to a site that allowed Google Checkout. With the Google Checkout promotion ending at year end this will certainly be a great future revenue stream for the big Goog.

So while I am continuing to be behind the Google Train, you had better think about waiting until after the next fed meetings coming up to be on the safe side, or just put on some now and some after the meeting. While I do believe the fed will cut, if they don't you will be able to get in at a lower price... Either way this is one of the best Long-Term holdings out there.

Some Basic Information About Stocks

You may think it is very hard to try and put a price tag on a stock and it is even harder to tell which direction that stock should be going, but there is a basic underline way to determine how to price any stock out there.

The first and most important thing to consider is a stock's PE or Price To Earnings Ratio. Now sure that may sound complicated, but it's really not. All you do is take this price of any stock, let's say for instance Royal Bank Of Canada (ry) which is trading at $57.56 a share and divide it by it's earnings per share which is $4.19. ($57.56/$4.19 = 13.61 PE) It is just that simple, Royal Bank Of Canada has a 13.61 PE or Price To Earnings Ratio!

So, all we do is apply this same logic to future earnings. Let's say Royal Bank Of Canada earns $6.25 next year and the market is willing to pay the same multiple 13.61 for the stock it would be at $85.06 per share. ($6.25 EPS * 13.61 PE = $85.06)

Basically, if a stock can continue to grow it's earnings and the market is willing to pay the same multiple or more for the stock it will go up naturally. Now, if earnings decrease the price will generally go down and so may the multiple that the market is willing to pay for the stock which is a double whammy.

Another thing to consider is that the higher the multiple the more "expensive" the stock is.... that is investors are paying more for future growth. Sometimes this can really pay off if the earnings are growing quick enough, but stocks with a high multiple that missed their earnings estimates can get hammered. Take Akamai (akam) for example, their recent earnings missed just made their stock drop like a rock due to the fact that their multiple was already so high that any kind of a miss would be ugly and it certainly was if you look at the 3 month chart.

Therefore, in general the stocks with the lower multiples can be much safer, but sometimes it can be worth it to pay up for growth. It all depends on what kind of an investor you are and how much risk you are willing to take on.

One last thing, the multiplies can be a good measure of comparing similar stocks, for instance Google and Yahoo. Google (goog) trades at $637.39 and has a PE of 54.18 while Yahoo (yhoo) trades at $28.48 with a PE of 55.55. So technical Yahoo is more expensive than Google! Yes that's right, even though Google is a $637 stock it is still cheaper than Yahoo at 28 smackers! Amazing really, especially since Google is growing faster than Yahoo which is what the multiple is really based on.

So next time you are trying to hunt for a stock, make sure to keep the multiple in mind and don't be afraid to compare it to it's peers. Let me know if you have any questions or comments and good luck to everyone this earnings season!