Google vs. Yahoo: where is the underdog?

Yahoo may not have “wowed

Google v. Yahoo: Where is the underdog? For The New York Times, the real battle between the Web powerhouses is "search", so Yahoo is deemed to be the underdog in “In the Race With Google, It’s Consistency vs. ‘Wow’” today:

Yahoo is on the defensive in the broader fight, where Web search advertising is the biggest prize.

Google is continuing to extend its lead in users and revenue from Web search, while Yahoo’s attempt to compete is foundering. Last week, Yahoo reported weak search revenue and said it would delay a critical search advertising system, sending its shares down 22 percent to a two-year low.

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Yahoo may not have “wowed” analysts last week with their search results, but analysts ought to have been wowed by Yahoo’s worldwide Web leadership.

Yahoo CEO Terry Semel proudly discussed Yahoo’s competitive advantage from “the largest and most engaged audience on the Web,” sharing Yahoo usage metrics, including growth in paid subscribers, during its Q2 earnings conference call:

more than 0.5 billion monthly users on Yahoo! branded Web properties. Excluding Yahoo! Japan and China, we delivered approximately 412 million unique users, up 28% year-over-year from approximately 321 million, and up from 402 million last quarter. On the same basis, our active registered user number was approximately 208 million, up 20% from 174 million in the second quarter of last year and in line with the previous quarter.

What's really exciting to me is that we have the highest share of time spent on the Internet in the US, and Yahoo! is the only company among all of our competitors that has grown minutes per visitor each quarter during the last year. Our user and engagement numbers positively impact all parts of our business, including Premium Services, which of course you know is our paying subscribers, who are the fastest-growing subset of users on the Yahoo! network. We ended the quarter with approximately 14.3 million unique paying relationships, up 1 million from the previous quarter, and approximately 4.2 million, or more than 40%, year-over-year.

Semel also believes Yahoo’s leadership in graphical advertising is a competitive advantage:

Our trusted brand, global reach and leading media environments and capabilities make us the logical first and, we believe, the best choice for the world's biggest advertisers.

Starting with graphical advertising specifically, we continue to deliver outstanding results. We have been developing this market for many years, turning long-term relationships and trust into increased dollars. That is why we expect to outgrow the segment in 2006, with growth rates well ahead of the projected industry growth rate, which is currently in the mid 20s. Evidence of our progress is that in the US, revenue from our top 200 graphical advertisers is growing 35% to 40% year-over-year, roughly similar to the trends we have seen over the past several quarters.

We also continue to attract an extremely large majority of the Ad Age top 100 advertisers in any given quarter.

Google, on the other hand, while “very busy” approaching advertisers for display advertising business, is still in “the education process.”

In responding to a question on “the success of your display product” during last week’s Q2 earnings conference call, Omid Kordestani, Google SVP of Global Sales and Business Development said:

the display advertising question and site targeting. We are actually very busy with our sales force approaching all of our customer base, and really going through the education process, the optimization, creating custom channels for these advertisers to reach the metrics and goals that they have. We are having success. It is not something that we can kind of broadly talk about yet. We are waiting to really gain more experience in different verticals from a different set of customers.

We have customers that are pretty big advertisers with us and they really like the results they're seeing, and the learning is really helping both of us expand here. So I agree, we haven't talked about it much. I think we would like to wait until we have more success under our belt and more customers, and more performance to talk about.

In the battle for competitive advantage in the fight against click fraud, Yahoo also showed leadership in its conference call. Semel took the initiative to address the issue during his prepared remarks:

Yahoo! is and always has been committed to protecting advertisers against click fraud. After a thorough audit of Yahoo!'s click-through protection by a third party, it was determined that Yahoo! has the best and continues to operate a click protection system that is better than recent industry estimates of click fraud levels. We feel great about the third-party validation, but we strive to do even more, and are committed to working to build industry-wide standards on click fraud.

Google, on the other hand, did not address the issue of click fraud protection for its advertisers during its conference call.

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