Is Microsoft Targeting the Wrong Search Company? - How Do They Compare?
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It wasn’t always like this. Less than three years ago, Yahoo! CEO Terry Semel was asked in an interview whether his company was considering a purchase of Google. Now, the thought of Yahoo! possibly buying Google is enough to boggle the mind. The two companies brought in similar net income during a recent quarter, though Yahoo! had somewhat less revenue. That bespeaks better efficiency than Google, perhaps, but it also indicates that Google is growing faster – which is one of the big reasons that Microsoft sees Google as the bigger threat.
A look at how Wall Street values the two companies is also instructive. At $42 per share for its stock, Yahoo! is almost a bargain, with a market capitalization of a little under $60 billion. Google, with stock trading somewhat to the north of $400 per share, has a market cap of more than $126 billion. So Wall Street seems to think Google is more than twice as valuable as Yahoo!.
But are we comparing apples and oranges here? Some time ago, I wrote an article that compared the strategies of Google and Yahoo!. While Google keeps insisting that its mission is to organize all of the world’s information and make it searchable, Yahoo! approaches things differently. It identifies itself as “a leading global Internet communications, commerce and media company” rather than a search company. It is this different approach that may be keeping it under Microsoft’s radar.
Yahoo! has always considered itself to be a media player, according to its co-founder Jerry Yang. But it has begun to emphasize that aspect of itself more and more lately. It started with the hiring of Terry Semel as CEO back in 2001. Semel spent most of the quarter century before that working for Warner Brothers, including as chairman and co-CEO. Warner Brothers is itself a media player par excellence; no doubt the folks at Yahoo! wanted some of whatever Semel did to build his former company up from making less than $1 billion from one revenue source to nearly $11 billion from multiple sources.
It looks as if Semel will fulfill that promise. At the beginning of 2005, Yahoo! formed a media group in Southern California to handle various entertainment properties and to deal with Hollywood executives. The unit is being run by a former ABC television executive. Yahoo! COO Dan Rosensweig wrote of the move that “By becoming a more integral member of the media community, we will bolster our ability to further grow and develop unique, compelling offerings for both consumers and advertisers.”
Next: Is Yahoo!’s Approach Working? >>
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