Yahoo loses ground to Google

Yahoo's quarterly profits dipped yesterday, while Google is expected to show four-times-faster revenue growth.

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By  Reuters Published  July 18, 2007

Yahoo reported a dip in quarterly profit yesterday as corporate advertisers spent less on its online ads, and the company gave a weaker-than-expected forecast for the rest of the year.

Shares in the Internet media company fell 4.2 percent in extended trade in the US yesterday.

Jerry Yang, the company's co-founder who took the CEO job in a June management shakeup, promised a new strategic plan as he sought to convince investors he is open to change and able to take on rapidly growing rival Google Inc.

"I intend to spend the next 100 days or so focused on mapping out a strategic plan," Yang told Wall Street analysts on a quarterly conference call. "There are no sacred cows."

He said Yahoo has three priorities: help advertisers gain insight into Yahoo customer interests, create a more open technology platform for Internet users and arrange more partnerships such as those struck in the past year with eBay Inc., Comcast Corp. and newspapers.

RBC Capital Markets analyst Jordan Rohan said he remains convinced Yang and Susan Decker, the former chief financial officer who took over as president last month, are in favour of a longer-term, slower-growth strategy.

"It just reminded me of current U.S. military struggles - troop surges and all that stuff," Rohan said following the management conference call. "It is frustrating to investors who clearly want the company to realise its asset value quickly."

Wall Street remains impatient following the management changes and wants to see significant job cuts, a renewed focus on its Internet media business, the outsourcing of Web search to either Microsoft Corp. or Google, and a potential combination between Yahoo and another major Internet player.

LOSING SHARE TO GOOGLE

Revenue excluding the cost of payments to advertising partners, or so-called traffic acquisition costs (TAC), rose 11 percent to $1.24 billion. By contrast, Google, the leader in search and pay-per-click ads, is expected to show at least four-times-faster revenue growth in its own quarterly report on Thursday.

Internet research firm eMarketer said it expects Google to grab 27.4 percent of the estimated $21.7 billion U.S. online advertising market in 2007, while Yahoo's share could fall to about 16.3 percent this year, down from 19.4 percent in 2005.

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