Facebook: Yahoo’s Last Chance Against Google (YHOO, GOOG, MSFT, AOL, NWS)

   

Yahoo! (YHOO) is not what it used to be as it has steadily lost ground to Internet search giant Google Inc. (GOOG) year after year. But thanks to a new partnership with Facebook, Yahoo may be better equipped to slow or even reverse its recent declines.

Ten years ago, YHOO stockholders saw some of the greatest profits of the dot-com bubble. Yahoo stock was selling at nearly $120 a share in January of 2000. Today, Yahoo shares sell for a fraction of that high and while the company is still financially secure, its future is less than sunny.

What began as the most trafficked search engine in the mid-90s is now a hodgepodge of different internet services. It isn’t just that Google has completely usurped it as the world’s premiere search engine technology over the past decade. From email to movie reviews to browser gaming, Yahoo is loosing its once massive audience to other web outlets.

Google stockholders have reaped the greatest rewards from the decline in Yahoo’s market share. While GOOG stock wasn’t around in the early part of the decade, it is up 340% since Google had its IPO in August 2004 – compared to a 46% decline in YHOO stock for the same period. But other web businesses that have benefitted have been privately owned social networking outlets like Twitter and especially Facebook. As recently as this January, Yahoo still held the greatest market share in web-based display advertising with a commanding 17% market share in the United States, dominating its closest market competitors Microsoft (MSFT) and AOL (AOL).  But less than a month ago, Facebook dethroned Yahoo, controlling just over 16% of display ad market share. Yahoo’s share decreased to just 12%.

Given all this, it’s unsurprising that Yahoo is turning to Facebook to save both its stockholders and its cultural relevancy. Yahoo announced Monday that it will incorporate Facebook functionality into its account services, letting its 600 million user base access a feed of Facebook updates by activating an icon in the left hand toolbar at Yahoo.com. Yahoo hopes this will encourage many of Facebook’s 400 million plus users to open new accounts with the site and to recapture lapsed users of Yahoo’s various services. Facebook integration is just the latest in Yahoo’s efforts to build a new brand identity through social functions. Yahoo incorporated Twitter functionality in February 2010.

Yahoo also announced that it would be revamping its privacy controls, no doubt to protect itself from the still potent uproar over Facebook’s maligned privacy policy. Facebook had to completely overhaul its privacy features in the past month following relentless criticism from both users and the press.

As the world’s most popular social network, Facebook stock is a longed-for commodity in today’s internet marke — especially for News Corp (NWS) stockholders. MySpace, a News Corps subsidiary, has lost not just millions of users to Facebook, but a significant portion of the display ad market share as well.

While Facebook is not a publicly traded stock at this time, there’s hope for an IPO soon. The partnership with Yahoo may be a way for the company to establish relationships with existing industry leaders as a way to make itself seem more legitimate instead of another doomed Internet IPO that is just a passing fad. Though Facebook CEO Mark Zuckerberg said as recently as this week that there’s no immediately plan to take the social networking site public, investors should closely watch this partnership with Yahoo and what it means for an upcoming Facebook IPO.

As of this writing, Anthony Agnello did not own a position in any of the stocks named here.


Article printed from InvestorPlace Media, http://investorplace.com/2010/06/yahoo-facebook-yhoo-stock-goog-google-microsoft-msft-aol-ipo-nws/.

©2014 InvestorPlace Media, LLC

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