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! 

10 thoughts on “Yahoo! It’s time to buy YHOO.

  1. I think your insight is on track, but I think that Google has also been their own worst enemy with some of the corporate decisions they have made.

    Google has been criticized for installing “cookies”; for offering a reverse-lookup phone directory that can be used to find a person’s address; for filtering out too much or too little pornographic content with its “SafeSearch” feature; for hurting small companies by ranking search results according to popularity and for altering the calculations of rankings; for scanning and digitally indexing copyrighted library books without asking the permission of copyright holders; the initial public offering had such a complicated auction system that only big investors had the wherewithal to figure it out.

    But censoring its own services for consumption in China may be Google’s greatest Achillies Heel. Even though Yahoo, Microsoft, etc. have all done China deals, Google is the company with the “Don’t be Evil” mantra. So they end up looking like the biggest hypocrites.

    Microsoft also has Google in its sights and Google could take a major hit if MS Live is any kind of success. Don’t be too quick to discount MS’s impact. Although investors have been pretty negative regarding the MS internet product roadmap.

    Flickr, MySpace, even AdultFriendFinder are all examples of community based portals that are very successful. Yahoo is a survivor and the Flickr portal is a good example of why it stays successful. Yahoo continues to not only survive, but grow and meet investor expectations by keeping the Yahoo collective ear to the internet rail.

    Meanwhile “clustering” search technology is poised to change “internet search”, as we know it now, in a profound way. Though “Clustering” has been around for a couple of years, I am finally seeing “cluster” search products in the document management and legal verticals.

    Check out clusty.com for an example of clustered search results.

  2. Pingback: PoliTech » Yahoo stock, and the internet search engine roadmap

  3. Chrono I actually hope you are right – and I’ll keep helping to reinvent the web like you and keep watching for the next big thing. But I think you missed my key point which is that Yahoo is the frontrunner as the internet powerhouse that will shepard in the change you describe.

    Zoomr and blinklist have little community power – few have heard of them and if they get good they’ll be happy to sell to Yahoo or another big player for a few million. The big question now is “who is going to consolidate the new web”. I’m leaning towards thinking it will be Yahoo.

  4. Pingback: Joe Duck » Yoohoo, YHOO?

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