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Tuesday, March 01, 2005

Google Vs Yahoo - Divergent Business Models

Many think that Google and Yahoo are competing rivals. No is the answer.The two companies "have very different approaches to almost everything," says Shelby Bonnie, chairman and CEO of CNET networks."Yahoo sees itself as a media company - Google views itself as a technology company". Excerpts with edits from a WSJ article on this topic:

Yahoo is modeling itself after the entertainment industry. It believes its future largely lies in building the equivalent of online theme parks featuring fantasy sports leagues, music, sites for new TV shows and other branded content and services. Yahoo wants users to come often and stay a long time so it can put more and more ads on their screens. Google is thriving on the Web's vast sprawl rather than trying to occupy one corner of it. Half of Google's advertising revenue, comes from simple text ads that appear on other people's Web sites. The other half comes mainly from ads that accompany Google's own search results."Google does search," the company declares on its Web site. "Google does not do horoscopes, financial advice or chat." Yahoo does all three. Indeed, Google produces virtually no content of its own, fearing that would tarnish the impartiality of its search service.
Many companies have rung up expensive failures trying to build businesses around online media and entertainment services. Yahoo’s bet on media is ambitious. The breadth of Yahoo's content puts it in conflict with a long and growing list of rivals beyond Google, from software giant Microsoft Corp. to cable titan Comcast Corp. Many companies want to offer media and entertainment services online as consumers increasingly use the Web through non-PC devices such as TV sets or cellphones.Broadband is the allure - almost 50% of home Internet users in the U.S. are now connected by broadband making it possible to watch video, play games and download music online. Yahoo says about 80% of the connections made to its service take place over broadband lines. Yahoo also says tying content to specific services - for example, allowing consumers to play Yahoo videogames over Yahoo's instant-messaging software -- encourages users to spend more time on the site.Yahoo has various ways of making money: search and display ads, fee-based services and online listings, such as help-wanted ads. One statistic highlights the divergence between the two rivals: Yahoo users spend an average of 4.8 hours a month on its site, eight times the 35 minutes logged by users on Google, according to consumer research firm comScore Networks Inc.
There is speculation that Yahoo plans to further expand its music efforts in competition with Apple Computer Corp.'s iTunes service. It is said to be planning to release new music-playing software and a digital-music store, Recently, Yahoo began publishing and distributing stock-trading data, in competition with Reuters, A revamped Yahoo News site is due in the next few months. Google says their focus is to make sure users conduct more searches. Each search generates a new set of tailored ads. Google's strategy, so far, is by some measures more profitable. Last year, Google's revenue was $3.2 billion, which came almost entirely from advertising, compared with Yahoo's $3.6 billion, of which 84% was ad-based Google also boasts a larger market capitalization: about $51 billion compared with Yahoo's $44 billion.But underneath those numbers, Yahoo is making significant gains, particularly in the United States, with new features that it has yet to introduce to international users. And at a time when Google has stalled in getting some new products to the market, Yahoo has been methodically working on a master list of projects: first, core Internet search, then shopping search, local search and next travel search, according to Danny Sullivan, the editor of Search Engine Watch, an Internet news site. He said Google had been more erratic. "Yahoo says, 'Where is the mountain? Let's climb it,' " Mr. Sullivan said. "Google says, 'Maybe we want to go up the mountain and maybe we want to go surfing.'" Michael S. Malone writing in wired , comes to the conclusion, it is hard not to conclude that Google is overvalued and Yahoo! is undervalued. These companies are really poles apart and the fight between two organisations are genrally viewes as fight between two differing business all other things remaining the same. Clerly these two giants are taking divergent paths - eacj with solid logic and pursuing new frontiers.. these two can only make the online world more interesting and exciting and one thing is sure - both would become part of every netizen.

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