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Thursday, October 12, 2006

GoogTube Uberpost

By William Trent, CFA of Stock Market Beat

The hubbub over the Google/YouTube deal, like Bill Gates’ decision to step down, was one we didn’t bother commenting on. More than enough was said about it. Of that outpouring of hot air, the post we liked best came from VC Ratings.

VC Ratings: Yahoo’s future turns on fixing its advertising system, not buying a social network
Its slightly inferior search engine and poor online advertising interface has left Yahoo with almost a third of as much cash as Google and about a fourth of as much market value. This reality limits its ability to get deals done. It’s one thing to spend 1.2% of your shares on a promising online video startup, another to spend 5%.

But, I don’t think it’s future will be determined by its ability to purchase this social network or another. Yahoo already has expertise in that area with Flickr, Delicious and a slew of other internal projects. Yahoo must sort out its advertising system so that it can start generating a similar amount of cash that is really powering Google’s surge.

There is more in the original post. It is worth reading.

The author may hold a position in the securities discussed.
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