ON YAHOO!, YOUTUBE AND MONDAY MORNING QUARTERBACKING

COULDA, SHOULDA

There's an article in the New York Times by Saul Hansell, titled "Yahoo!'s growth being eroded by rivals", that covers the challenges the company faces in recent months, punctuated by the swooping in by Google to buy YouTube this week. 

There seem to be similar takes on Yahoo! post the Google/YouTube merger announcement yesterday.  See this piece in the LA Times, titled "In YouTube deal, Google beats Yahoo! at it's own media game" as an example.   

This wave of monday morning quarter-backing post the deal strikes this reader at least, as bit of a cheap shot.

The main thesis of the NYTimes piece seems to opportunistically beat up Yahoo! for "failing" to win the bidding for YouTube to Google, as seen in the opening line:

"As  Google whips out its fat wallet to buy the video site YouTube, it is making  Yahoo look even more out of step with the fast-changing Internet advertising market."

It's natural to think of Yahoo! in the wake of the Google/YouTube acquisition, which has been a media sensation the last few days.  As an example, Fred Wilson cites it as one of the factors motivating him to sell Yahoo! shares today and sit on the sidelines.

The New York Times piece starts off with a stark, stock market driven comparison:

"Google has $11 billion in cash and a market value of $131 billion, while Yahoo has $4 billion in cash and is worth $34 billion."

It then goes on to weave together a series of suppositions, assertions, and facts to make it case.   Here's an example of a supposition:

"From video programming to social networking — areas of interest to users and advertisers alike — the company is losing its initiative."

Or is it an assertion?  Nevertheless, here's an assertion:

"Some analysts argue that Yahoo needs some bold moves to signal to investors, advertisers and customers its commitment to innovation."

And here is a fact, that likely has the most to do with Yahoo's disappointing performance in the stock market vs. Google:

"Yahoo has been stymied because its text advertising business has been largely frozen until it completes a new software system. The upgrade is more than a year late and the delay has sucked up the company’s engineering resources and prevented it from developing new advertising products. Yahoo’s system produces much less money from every page than Google, a handicap in bidding for advertising deals."

The delay on the ad system (aka Panama), is the one bit in the article that I'll agree with, and it's something I've posted on before.

All the while the drumbeat for Yahoo! to make a face-saving acquisition in the wake of the Google/YouTube deal increases, including a mention in the NY Times article.  A potential deal with Facebook has been in the air of late. 

But I'll repeat what I said the last time this possibility surfaced:

"...it's important to make sure that the needed due diligence around the long-term initiatives doesn't get short-changed by the short-term imperatives."

Wall Street cares about that before all else. 

DISCLOSURE:  I was the lead research analyst on Yahoo!'s IPO in 1996, and covered the company for much of it's history.  I am currently an investor in Yahoo! shares.