As I go over Yahoo (
YHOO) earnings data I was happy to see a decent increase in revenues even if earnings disappointed. However, it does seem that Google (
GOOG) looks like the better value. (According to First Call, Google has a 2007 P/E of 35 vs. 52 for Yahoo). Then I came across the following blog entry by
Jay Meattle at
Compete.com:
He shows top 20 US website usage ranked by time spent on line. MySpace, owned by
Newscorp (
NWS), comes in first at 11.9%. Second place belongs to Yahoo at 8.5%, four times the amount of time spent on Google (fifth place) at only 2.1%. These kinds of numbers continue to disappoint me in Yahoo's management who can't seem to monetize such an industry leading position.
My support of
shareholder activist Eric Jackson's Plan B to change Yahoo strategy continues as the best way to extract value from Yahoo.
Disclosures and Confessions: I own Yahoo and
plan to pledge my shares to the campaign. However, if the shares rise
above $35 I'm likely to start selling. I'm short Jan 2008 35 strike
calls against half my position of YHOO and am also short Jan 2008 30
strike puts. I do not own Google (GOOG) but have traded it (both short and long) in the last two years. I do not own News Corp (NWS) nor have I traded it in the past two years.
I like Yahoo!. For years MyYahoo.com has been my browser startup page; I pay to use Yahoo enhanced email; I have over 2000 photos on flickr; I find Yahoo finance to be almost as good as Bloomberg but
without the $1800 a month price tag; I have even been using Yahoo's
search recently and find it so greatly improved that I don't need Google as much, I have registered websites using Yahoo.
Disclaimer:
Nothing in this blog is meant to be specific financial advice or a
recommendation to buy or sell. I do not give investment advice. Do
your own research. Do not rely on anything in this weblog to make
investment decisions. I do not log all my trades here. I only describe
or mention those that I think might be interesting. Consult an
investment professional familiar with your specific financial situation
before buying or selling any security. 
I don't doubt the fact that people spend more time on Yahoo than on Google; but the unfortunate truth is that Google's core activity -- search -- is simply much more valuable to advertisers than most of the things people are doing on yahoo's various sites because people searching are in the act of actively looking for something.
I bet that if Google were to reveal their "user minutes" and revenue in detail, they're probably not much better than yahoo at monetizing the time spent in other apps like gmail, calendar, and docs; their big differentiator is that right now, they own search, the main place where intent is expressed.
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Good point. Search is currently where the high margin money is; Google owns search and Yahoo has dropped the ball. I'm sure at some point some new method (maybe something web2.0-ish) will replace Google's search dominance. But there's no telling how long that might take.
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How do you come up with 52 for Yahoo's 2007 P/E? I am not sure you're assumptions are even close. I've gone back and forth with Yahoo! Finance and Google Finance and here are my findings.
Per Yahoo! Finance:
Yahoo! Forward P/E (1yr.) 38.41
Google Forward P/e (1yr.) 35.67
Per Google Finance:
Yahoo! F P/E is 44.95
Google F P/E is 46.37
Where are you getting your numbers???
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Thanks for the comment.
I got the estimates from First Call for Fiscal Year End 2007. I don't think First Call estimates are not readily available without a subscription or access via a broker. One of my brokers gives me access with a minimum commission level.
The Forward P/E you see on Yahoo Finance is the 2008 Year End Estimate.
As for Google Finance, they don't provide an easy explanation but I think that number is the Forward Four Quarters P/E. I don't know who provides their numbers. Perhaps Reuters.
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