Yahoo! It’s time to buy YHOO.

I've been waiting for a "sign" to buy Yahoo (well, some SHARES of Yahoo ) which seems due for a huge surge when their publisher network revenues kick in later this year. Yahoo has more traffic than Google but you sure wouldn't know it from the buzz, even among industry insiders. Capitalization lags Google big time for what appear to be no really good reasons.

My sign that Yahoo will do very well came last week as I signed up and used Flickr, which ranks among the most intuitive and brilliant applications I've ever used. Checking their Alexa stats Flickr is 85th most visited site and rising fast – proving that Yahoo can take a good idea, make it better, and expand a giant community almost overnight. A giant community that posts, for example, pictures from an Antarctica Science Voyage. Is Web 2.0 cool or what?

It's not that Flickr alone will increase YHOO profits.  What strikes me clearly is that Yahoo – far more than Google – is positioning itself as the front runner with big plans to grow and maintain the flexibility to fill many niche spaces created by the rapidly expanding Web 2.0 economy.

Yahoo's profit boost will come from online publisher revenues which now comprise about 43% of Google's revenue and will flow to Yahoo if they offer publishers a higher revenue share. Yahoo will be able to legally adjust profits upward very strategically using this technique and I'm guessing that they are now drooling at the thought of doing that.

Flickr is only one of many aquisitions of Web 2.0 companies by Yahoo, which is clearly the 2.0 leader.

Google's equivalent in the photo space? Hello? Hello? What the HECKo? It may be a good application, but I'll probably never know and almost everybody's using Flickr now, pulling others in every day.

People are very, very unlikely to switch away from a great application like Flickr once they start using it. This EBAY effect is powerful in some niches like online auctions or photos where the main barrier to participation is signing up and learning to use the service.

Contrast this with NO barrier but the admittedly powerful "habituation" to search engine use where it's likely people will flow to the 'best search' over time rather than the one they started with.   Now that Yahoo is equal to Google in relevancy this will tend to work in their favor as well.

Time to buy Yahoo!