) has shut down a number of under-performing and non core
sites in the last few years. This includes social bookmarking
service Delicious, search engine AltaVista, online news aggregator
Buzz, and social network MyBlogLog to name a few. Yahoo competes
with Facebook, Google (
), Microsoft (
) and AOL (
) in the online advertisement market, with Facebook and Google
the most potent threat to Yahoo.
Here we analyze Yahoo's current struggles in the online
advertisement market and the company's efforts to alter this trend.
We currently maintain a
$17.88 price estimate for Yahoo stock
, roughly 10% higher than market price.
Yahoo Losing Ground to Facebook and Google
Yahoo's revenues from the U.S. market declined from $4.85
billion in 2009 to $4.43 billion in 2010, while the overall U.S.
online advertising market increased from around $23 billion in 2009
to $26 billion in 2010. Even the time spent on Yahoo sites has gone
down over the last year or so. This data illustrates that Yahoo is
losing ground to Facebook and Google. By shutting down
under-performing sites, Yahoo further risks losing a considerable
number of loyal users, which exceeds 600 million at present.
See our full analysis and $17.88 price estimate
Yahoo Looking to Make a Comeback
Shutting down under-performing sites does not mean that Yahoo is
completely cutting down on investments. It is trying to invest in
growth areas like video, mobile and social networking.
With videos, Yahoo is improving the amount and quality of its
content across various media verticals like sports, news, finance
and entertainment. Videos carry higher engagement levels and hence
provide better ad monetization opportunities for Yahoo (See
Videos Will Help Yahoo's Display Ad Business and its
Yahoo has also undertaken an initiative to leverage Facebook's
large user base to drive traffic to its sites. It has installed
Facebook tools such as "Like" and "Share" buttons on its sites,
creating a viral effect as Facebook users share Yahoo content
with their friends (See
Gotta 'Like' Yahoo's Traffic and Stock Upside from Incorporation of