The heat's on Yahoo

You know you've got problems when both the Economist and the NY Post are on your case. The new edition of the former is headlined "Terry Semel's Long Pause" and it finds Yahoo's chairman and CEO trying to explain away two recent stock sell-offs. One came after word that its Panama project, a new means of making more money on searches, would be delayed until the end of the year. Then Semel warned last month that growth in online advertising was slowing down - even though no one else is seeing a slowdown.

This week the Interactive Advertising Bureau and PricewaterhouseCoopers, a consultancy, jointly released the latest industry numbers, which show that online advertising in America grew by 37 percent to $7.9 billion, a new record, in the first half of the year. Another firm that tracks online advertising, eMarketer, cut its forecasts, but that was in response to Mr Semel's statement. Jim Lanzone, the boss of Ask.com, the fourth-largest search engine after Google, Yahoo! and Microsoft's MSN, says that his firm is not seeing any similar easing of demand.

The deeper problem, says Henry Blodget, founder of Cherry Hill Research, a consultancy, is that Yahoo! is still suffering from a “colossal error” it made in the late 1990s. At that time, it already wanted to become a portal, or a gateway to content on the web, but thought that search would be at most a feature, not a business in its own right. This allowed Google to dominate the category. “By the time Yahoo! realized its mistake about three years ago it was too late,” says Mr Blodget. Google's share of search queries has been growing, and the enormous profits from this product allow Google to invest more than Yahoo! does.

The Post story takes aim at Semel's boring content deals - a little ironic since the guy is the former head of Warner Bros.'s movie division.

According to comScore Media Metrics, MySpace users watched more videos than Yahoo! users in July, and last month Nielsen/NetRatings found that nearly six times as many unique visitors went to YouTube as Yahoo! Video.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
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