The Biz of Coding

Google beats estimates; Yahoo! Inc.almost meets estimates but sees its stock tumble

by Ujwal Tickoo on July 21st, 2006

Google’s (GOOG) second quarter revenue for 2006 (excluding Traffic Acquisition costs TAC) was US $ 1.68 billion. Google’s result beat analyst expectations of a revenue of $ 1.65 billion.

Yahoo! Inc. posted US $ 1.12 billion excluding TAC. Though Yahoo! almost met the expectations of financial analysts its stock has tumbled from around $ 32 last week to around $ 25 (at the time of writing this post) due to the announcement of delays in release of Panama — the new Y! advertising platform expected to serve better ads and provide better monetization to the company.

Google’s stock fell after Yahoo!’s results announcements and is still below the around $ 410  mark it was last week. At the time of writing this post Google is at $387. Eric Schmidt rightly said that he was "very, very happy with having such a strong quarter in a seasonally weak period."

Google’s main problem is a lack of diversification in its revenue stream though it leads Yahoo! in web search. This weakness is supressed by the spectacular growth the company is seeing in Search advertising revenue and market share gains agains Yahoo! and MSN. However, like the previous dot-com burst, a change in economy will severly hit Google if it cannot find a more diversified product portfolio.

Yahoo! the world’s most visited web portal has been bogged down by a better performance in monetizing its massive traffic. Yahoo! however is a better diversified company with several of its products being in top 2 in various categories like Web mail, Instant Messenging, Financial News etc.

Google’s more than 6000 employees are primarily focused on Web Search. This explains the stronger results Google is showing in a revenue trend which is currently powered by growing annual advertising revenue from web search.

POSTED IN: Google, Yahoo