No. 2 search engine provider Yahoo! Inc.'s (NASDAQ:YHOO) third-quarter earnings, due Tuesday after the closing bell, are likely to stand in stark contrast to the stellar results announced by category-leading Google Inc. (NASDAQ:GOOG) last week.
Analysts anticipate that this will be the fourth consecutive quarter in which Yahoo!'s net revenue fell below the preceding quarter's, AP technology writer Michael Liedtke points out.
Liedtke offers this astute comparison between the competitors:
The main reason Google is doing so much better than Yahoo and most other companies is because it dominates Internet search -- an activity that has turned into a highly effective marketing vehicle.
Advertisers aren't as hesitant to spend on commercial messages tied to search requests because they usually only cost money when a consumer clicks on a link. The requests also make it easier to figure out which people might be interested in buying a specific product or service.
Although it runs the second largest search engine, Yahoo specializes in online billboards and other visual forms of advertising that typically run as part of more expensive marketing campaigns. That type of advertising probably won't rebound until the still-shaky economy becomes more stable.
Nevertheless, in a research note Monday morning, Jefferies & Co. analysts say they are maintaining a buy rating at $23:
Yahoo! should deliver an in-line 3Q given stabilizing ad-demand and fairly low expectations. While Display and Search should remain under pressure ST, YHOO's crisper focus on Display and margins should position it well LT. Accretion from the MSFT deal and valuable Asian assets make the valuation of core Yahoo! attractive. -- Mary Kathleen Flynn
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