The New York Times Company's
) Q1 2011 earnings conference call, management discussed the
negative impact that the recent algorithm changes in Google (
) have had on NYT. Specifically, the company showed
concern regarding the loss of traffic for its site About.com, a
consumer-focused website that provides advice and information on
topics ranging from cooking to construction. New York Times
competes with News Corp's (
) The Wall Street Journal (WSJ) as well as internet-based outlets
like Yahoo (
), Google and AOL (
Our price estimate for NYT stock, at $9.19
is about 5-10% above market price.
Google Algorithm Changes Affect NYT
Google does not disclose its exact algorithm changes. Still, we
know that the recent update aims to reduce the search ranking of
"low-quality" sites. As per Google, this change could affect around
12% of search queries. During the earnings call, management
mentioned that design changes in Google's algorithm had a negative
impact on advertisement click through rates. About.com also took a
hit from the change.
According to NYT management:
Design changes in cost-per-click advertisements served by
Google had a negative effect on click through rates in the
quarter, and we expect that to be the case through the second
quarter as well. About also experienced a moderately negative
impact on page views from the algorithm changes Google
implemented in the quarter.
We estimate that About.com accounts for around 14% of the
company's stock value.
So About.com's traffic could suffer in the near-term. The real
issue is whether these concerns can be resolved. Should these
concerns persist, there could be downside to
our $9.19 price estimate for NYT
. You can examine this affect by dragging the trend line in the
modifiable chart above.
See our full analysis and $9.19 price estimate