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Monday, October 23, 2006

The Lesson Of Yahoo Japan (YHOO)(GOOG)

Unlike its US counterpart, Yahoo Japan is doing very well, thank you. But, there is one key similarity. Yahoo Japan is the most popular portal in the large Asian market, just as Yahoo! is in the US.

The parallels appear to disappear there.

Yahoo Japan's earnings for the last quarter rose 22% to $115 million.

The Japanese portal has done right was Yahoo has done wrong. The company has build up a number of online stores and auction sites allowing it to draw a transactional audience like the one that Ebay has. Yahoo Japan has also beefed up its video section. Google is beginning to enter the Japanese market in earnest, and Yahoo Japan means to keep it foothold.

Yahoo Japan has some of the same problems as Yahoo! as its struggles with ad revenue growth, but the company has more than made up with this using innovations like online shopping where its revenue grew 42% quarter over last year's quarter.

After its earnings announcement, Yahoo Japan's share traded flat. Quite a contrast to the share drop Yahoo! shares have had in the US.

Innovation still goes a long way to trump competition.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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