Can Yahoo! catch Google?

Before Google became Google, Yahoo! owned the search business. However, since Google search came onto its own, Yahoo! search was forgotten and relegated to the number two position. No one even considered the possibility that someday Yahoo! search can generate the type of revenue that Google generates, and possibly take on Google on the core search business that it owns a majority market share by a long shot. However, Yahoo! is coming back with Project Panama. It has a long road ahead, and significant catching up to do. And the question that was once forgotten is now being asked: Can Yahoo! catch Google? Mac Greer at Motley Fool interviewed Pulitzer prize-winning reporter David Vise, a senior commentator with breakingviews.com and the author of The Google Story on the question of the year: Can Yahoo! catch Google?

Yahoo! is one of the top 20 Innovators comprising the The Innovation Index, and is leading the top 20 Innovators in stock performance gain in 2007.

Here is Mac Greer's analysis on whether Yahoo! can catch Google, and his interview with David Vise:

--------Mac Greer analysis and interview-------->

According to preliminary reports, Yahoo Inc. (Nasdaq: YHOO) is recording some early success with its revamped search business, Project Panama. Online measurement company comScore Networks reports that since Yahoo! launched its new search business on Feb. 5, 2007, its click-through rate increased by 5% after its first week (ending Feb. 11) and another 9% after its second week (ending Feb. 18). But can a new and improved Yahoo! catch a tried-and-true Google (Nasdaq: GOOG)? I recently talked Yahoo! and other search-related business with Pulitzer prize-winning reporter David Vise, a senior commentator with breakingviews.com and the author of The Google Story.

Yahoo vs. Google

Mac Greer: David, Yahoo! recently launched what whey call their Project Panama, a new ad-ranking algorithm aimed at improving Yahoo's paid search. Do you think Yahoo! can compete with Google in paid search, or has the horse left the barn?

David Vise: I think that Yahoo! is a No. 2, but I think Google is a runaway No. 1. Google is synonymous with search. Look up "Google" in the dictionary, and it is the noun that has become a verb, "to Google." Yahoo! does have a space in search that is enviable to many people, but in reality, when you look at the numbers in terms of search, Yahoo! has less than 25% of the share. So Google is more than double its closest competitor, and that gap is growing.

Yahoo! has another problem with Project Panama that it is seeking to address. That is, Google is far better at converting searches and clicks into dollars than Yahoo! And Yahoo!'s ability to convert clicks and searches on Yahoo! into bottom-line profits has been very poor, and the company CEO, Terry Semel, has admitted as much. So it will be interesting to see how much Yahoo! can close the gap with Project Panama, and to the extent that it fails to do so, Google's lead will only widen. Remember, Google profits about 50% from searches done on Google.com, but it is the tremendous network that Google has created of literally hundreds of thousands of websites around the world that accept its ads and that it shares revenue with generously that give it a tremendous amount of market clout that goes well beyond its owned and operated sites.

MG: And David, I was stunned to see this stat from Piper Jaffray: Google earns two to three times as much on every user search than Yahoo!?

DV: That's right. It is a stunning figure, and you can bet that while Yahoo! is very publicly rolling out Project Panama, Google is very quietly also doing things to ramp up and improve its monetization of search. That kind of an edge between a No. 1 and a No. 2 in an industry increases the gap so widely that one could envision a time when you get to the point where Google essentially has little or no direct competition and where it really is in a monopoly position, as far as not only the information people are looking for, but also in terms of dominating Internet advertising.

MG: And if Project Panama doesn't take off, can we assume that Yahoo! CEO Terry Semel may not be Yahoo! CEO Terry Semel?

DV: Yes, I would say Terry Semel's future as the CEO of Yahoo! is tied directly to the success of Panama. If Panama succeeds, Semel is the CEO. If Panama goes down, Semel goes with it.

<--------Mac Greer Analysis and Interview--------

NY Times ran a story on the launch of Project Panama on Feb. 5. In this story, "Terry Semel acknowledges that Yahoo was late in starting the project (Panama). He said that happened partly because Yahoo's search advertising system, which the company acquired through its takeover of Overture Services for $1.6 billion in 2003, was performing well, and it took time for executives to realize just how much better Google's system was." ''Panama is a foundation for us to start sewing together all our advertising assets,'' said Tim Cadogan, vice president of Yahoo Search Marketing. Cadogan is also a realist. He believes the initial version of Panama will not get Yahoo! ahead, rather make Yahoo! compete more effectively versus Google.

Yahoo!, perhaps coincidentally after the launch of Project Panama, also began seeing more clicks directed at sponsored search ads, which generate more revenue than algorithmically generated ones. Sponsored clicks represented 10.6% and 11.1% of total click volume in the weeks ending February 11 and February 18, respectively, up from 10.1% during the week of February 4, according to comScore. Perhaps Project Panama is positively impacting the overall Yahoo! advertising business.

In an unrelated story today, Yahoo Inc. (YHOO) Chief Financial Officer Susan Decker was appointed to the board of the venerable Berkshire Hathaway Inc. board. Berkshire Chairman Warren Buffett indicated that the board was looking for someone who was "owner-oriented, business-savvy, interested and truly independent."

Bottomline:

Yahoo!, beginning in late 2005 and 2006, has assembled an experienced team of managers, research fellows and economists to launch bold new initiatives, overhaul the search business beginning with Project Panama, and essentially take on Google in a twelve round boxing match. The first round was won by Yahoo!, the second and third round won decisively by Google; however, Yahoo! has shown that it has the staying power, and wants to now begin the next nine rounds of this long duel. This fight can easily take the next five or ten years. However, Yahoo! now wants to play this game on its own turf, and not get dictated by Google's rules. Case in point: Yahoo! Answers that won out against Google Answers. Yahoo! is also executing well on the mobile front with better, integrated solutions and key partnerships. Yahoo! perhaps has the senior management now that will methodically create the long term plan of attack versus Google. Then again, Google would make you believe that in the world of search, video, and Web 2.0, it is not the seniority that matters: rather unbridled passion and entrepreneurship. Managing and innovating through chaos is indeed the name of the game at Google.

If one takes a look at the financials, the discussion on whether Yahoo! can catch up with Google appears moot. In the quarter ending 12/31/2006, Google reported revenue of $3.2 billion; Yahoo! revenue in the same quarter was $1.7 billion. In the previous quarter ending 09/30/2006, Google revenue was $2.7 billion; Yahoo! revenue was $1.6 billion. Google quarter over quarter revenue growth is 19%. Yahoo! quarter over quarter revenue growth is 8%. A key measure is the widening quarterly revenue gap between Google and Yahoo!. The revenue gap for the 12/31/2006 quarter between Google and Yahoo! was $1.5 billion; for the previous quarter ending 09/30/2006, the revenue gap was $1.1 billion. The revenue gap quarter over quarter growth between Google and Yahoo! is a staggering 36%. If Yahoo! has to catch Google, not only Yahoo! has to increase its own quarterly revenue growth in the 25% to 45% range, but also grab market share and revenue from Google, and finally stall Google's revenue growth. Is this a lofty goal? Of course. Impossible? Nothing is. Unlikely? Only time will tell. Because it will take many years if Yahoo! is indeed going to catch up with Google.

Can Yahoo! catch Google? In ten years, would the headlines read: How Yahoo! toppled Google?

References:

Fool Article

Focus on feedback

Every week the Inside AdWords crew get together to plan out our posts for the coming week and discuss other blog-related business. Sometimes, after that's done, we kick back and get a little philosophical -- even brainstorming on occasion about the future of the blog. When we do this, one theme invariably comes up, which is the value of feedback. Specifically, feedback from you, our readers and advertisers.

In our most recent meeting we agreed that it's time to get even more serious about your feedback. We'd like to earn more feedback from you by doing more with the feedback we get. Here's our plan:

• You may notice us asking for your feedback more often. This would include feedback about the Inside AdWords blog, as well as feedback regarding the AdWords program itself.
  
  
• We'll post responses to your questions and comments in this blog more often -- focusing on those of general interest, rather than particular questions about individual accounts.
  
  
• Lastly, we'll make sure that your feedback about the AdWords program is heard by the right people within Google: each week, we'll include a number of your verbatim comments (minus any personally identifiable information regarding advertiser and account) in an internal Advertiser Feedback Report. It may be of interest to know that this report, which collects advertiser feedback from a variety of sources, has been compiled for the last 198 weeks, and is sent to more than a thousand folks within Google who have requested to receive it. In the past, comments from our readers have certainly been included in this report -- but starting next week we'll be including them in a more formal way, in a new Inside AdWords section.

So, please keep your feedback coming. By doing so, you'll be helping Inside AdWords become a more useful resource, while also helping the AdWords program become even more finely tuned to your needs.

Thanks in advance!

Posted by Blake, Inside AdWords crew

5 Ways to Encourage Impulse Purchases for Your Home Business Website

Are you wanting people to be so enamored with your product or service on your home business website, that they will purchase right away? If so, here are some cool tips to help you accomplish this goal!

5 Ways to Encourage Impulse Purchases

by: Bobette Kyle

I just bought six square pieces of spongy fabric for $20 and walked away happy - "victim" of an impulse purchase.

I was at one of those big show events and walked past a demonstration booth. I even knew it was coming. About 50% of the people walking out were carrying two bright yellow cylinder-things.

As we walked toward the convention center, I told Tim (my other half), "There's one of those guys with a microphone in there, doing a demonstration. He gets people so excited they think they have to buy those things. They over-pay then never use them." I said this a bit smugly. I know of such things, so I wouldn't succumb.

Yeah, right. This guy was good. So good, I came away with five ideas for increasing sales from impulse purchases. Next time you evaluate short-term sales and marketing strategies, think about and apply these five impulse purchase lessons...

Impulse Purchase Lesson 1: Demonstrate an impressive, relevant feature.

If the product is chocolate, sold at a retail checkout stand, you have no need for this one. Human nature takes over. When you are selling unrecognizable cylinder things, people need some encouragement.

You would never know it to look at them, but these things were super absorbent shammies. They can suck 8 - 10 ounces of soda out of your carpet in nothing flat AND it makes for an impressive demonstration. When the demonstrator mentioned they could dry a sweater in three hours, I was hooked. Never mind we have about two spills a year in my house and I don't own any "lay flat to dry" sweaters.

This ability to get people to "live in the moment" is one key to a successful impulse purchase demonstration. The salesperson has a lot to do with it, of course. Repetition of an incredible, attractive feature, however, is key as well.

Think of any infomercial or "Billy Mays" product. There is always an "AMAZING!" feature - cooks in minutes, instantly removes stains, easily pulls dings from your car, etc.

2: Try to "time it right".

Quite coincidentally, one of those semiannual spills in my house happened the day before I bumped into the yellow cylinder guy. I was thinking "If I'd had these yesterday, right now we wouldn't have books stacked in the middle of the living room floor." Quite by accident, he had related to something that was top-of-mind for me.

Fortunately, you do not have to rely on coincidence. At any one time, there are usually six or eight generally popular "themes" you could tie into. Better yet, your target audience is likely to have it's own unique interests.

On the Internet, you can "time it right" by associating complementary products or services. If someone is researching monitors, for example, perhaps they need an ink cartridge for their printer.

Showing or highlighting ink cartridges on the screen along with the monitors may incite an impulse purchase. Better yet - and this is impossible unless you have order histories or detailed profiles - show them the exact cartridge they need.

3: Make it easy.

It turns out the cylinder things costs a flat $20. There was no change to mess with, no stopping to fill in order forms, and no multiple pieces of currency. As people pulled $20's out of their pockets, the demonstrator took them and handed over the shammies in a single motion.

On the Internet, you can make it easy in two ways - ordering and delivery.

Make the order process as simple as possible. Amazon's "Quick-Click" links are a good example of making ordering easy. Impulse purchasers simply click on the "Buy from Amazon" button and order straight off a pop-up window. You can see how it works here, in the left column under "Amazon 'Quick-Click' Example": http://WebSiteMarketingPlan.com/Arts/ImpulsePurchase.htm

Easy delivery is another way to encourage impulse purchases on the Internet. Immediately downloadable digital items are an example. For physical items, quick delivery - overnight, same day, or local store pick-up - can increase sales.

4: Give an enticingly presented discount.

A roll of three shammies was $21 something, but the guy was taking care of the sales tax, which made it an even $20 (But wait, there's more!). Because it was early he would throw in another 3-roll for no additional charge. Caught up in the moment, we nodded agreement. We were getting a deal - no sales tax plus three free.

The way a discount is presented can make a deal sound either appealing or "not such a deal". Which sounds better?...

1. "Buy One, Get One Half Off." OR "Buy Two and Get a 25% Discount."
2. "3 for $5.00" OR "$1.67 each."
3. "40% Off Sale" OR "On Sale, $12.00 each." (Assuming $20 item.)

Another way to encourage impulse purchases is to give a discount by bundling. Offer to reduce the price on a second, related item (Like in example #1, above.).

Online, I have seen this done with books. Some booksellers offer you a chance to save money on shipping and/or book price if you also purchase a related item.

5: "Keeping up with the Joneses."

Instead of putting the shammies in a bag, the demonstrator rolled them up into a cylinder. This way, people at the show would see others carrying them around and wonder what they were missing.

The same concept can be applied to the Internet. I have seen messages like: "Others who bought 'x' also bought 'y'" on order forms, at check out, and on product screens.

So there they are - five tactics the yellow cylinder guy used to convince me (and nearly everyone around me) to happily walk away with six shammies. By correctly applying these same techniques you can see your sales soar as well.

About The Author Bobette Kyle has more than a decade of experience in Corporate Marketing; Brand and Product Marketing; Field Marketing and Sales; and Management. She is author of the Marketing Plan and Promotion Guide "How Much For Just the Spider? Strategic Web Site Marketing", named one of the top 15 books of 2002 by NonFictionReviews.com. Read more about the guide here: http://WebSiteMarketingPlan.com/bookinformation.htm © 2003 Bobette Kyle. All Rights Reserved.

The Innovation Index drops 4%, still up 1% and leads major U.S. indices - Weekly Report 02-28-07

Amidst the biggest market selloff since 2001, The Innovation Index dropped 4% in one week. NASDAQ and Dow Jones Index each dropped 4% as well in one week. S & P 500 dropped 3% in one week.



For the year though, The Innovation Index is still up 1%. S & P 500 is down 1%, and Dow Jones Index is down 2%. NASDAQ is even for the year. The Innovation Index continues to hold on its own despite the large selloff, and is in the positive territory.

The Innovation Index closed at 70.12 on February 28, 2007, up 0.81 points, or 1% from the closing price of 69.31 on December 29, 2006.

Yahoo! Inc. (NASDAQ: YHOO) continues to lead the top 20 Innovators with an impressive 21% gain for the year. Research In Motion Limited (NASDAQ: RIMM) is back to double digit gains, and is up 10% for the year. eBay Inc. (NASDAQ: EBAY) is still holding well at 7% gain for the year. Target Corp. (NYSE: TGT) is surprisingly doing well at 8% gain for the year owing to a solid earnings report, same store sales increase of 4.8% from previous year, and good outlook. Wal-Mart Stores, Inc. (NYSE: WMT) is also in the positive at 5% gain for the year buoyed by strong retail market.

Across the board, all the top 20 Innovators were in the red last week owing to the large selloff. However, the top 20 innovators will prove their resilience as the market begins a rebound. For now, The Innovation Index is still up 1% for the year, and continues to beat the major U.S. indices.

About The Innovation Index

The Innovation Index introduced in December, 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index has returned 119% over the last five years. This assumes an investment in each stock of The Innovation Index (buying each stock). An average of $100 invested in The Innovation Index on December 31, 2001 returned $219 as of December 29, 2006. By comparison, $100 invested in each of S & P 500, NASDAQ and Dow Jones Index returned $124. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by 77% over the last five years.

The Normalized Innovation Index is even more impressive, and has returned 174% over the last five years. This assumes equal investment in each stock of The Innovation Index.

The alphabetical list of the top 20 Innovators of The Innovation Index along with their stock ticker symbols are presented below:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Dell Inc. - (NASDAQ: DELL)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Microsoft Corporation - (NASDAQ: MSFT)
Research In Motion Limited - (NASDAQ: RIMM)
Southwest Airlines Co. - (NYSE: LUV)
Starbucks Corporation - (NASDAQ: SBUX)
Target Corp. - (NYSE: TGT)
The Proctor & Gamble Company - (NYSE: PG)
Wal-Mart Stores, Inc. - (NYSE: WMT)
Yahoo! Inc. - (NASDAQ: YHOO)

The Innovation Index will analyze the positions and standings of the top 20 Innovators at the end of each year. For 2007, there will be no further changes in The Innovation Index.

Disclaimer: I invest in the stocks comprising The Innovation Index.

What is Business Value? Part 1

I have noticed a bunch of projects lately (mine and those of other people) where the business value is not so clear.

As Yogi Berra said, "If you don't know where you're going, you might not get there."

But what is Business Value? I mean, what is it really?

First, I like the definition of Lean. Value is defined by the end customer. Value becomes meaningful when talking about a specific product that meets a customer’s needs at a specific price at a specific time. (See here: http://www.lean.org/WhatsLean/Principles.cfm#specify)

End customer. So, all the rest of us are just making guesses at what the customer wants. Remarkably, sometimes we are right. And the next sentence is also important. There has to be a context. In fact, I believe the context is much larger and harder to define than this. We buy things based on a conscious or unconscious comparison to all the other things we might buy or do or not do.

For example, when I go to Starbucks for a decaf coffee (don't ask; no, I hardly ever buy a latte), I am implicitly comparing to all the other cool things I could do, places with social scenes, drinks I might have, other bars or coffee houses I have gone to lately.

My main point is business value is complex. And it changes. The customers are changing and my understanding of the customers is hopefully improving along the way. Indeed, I should organize things so that I can experiment with new products, to find out if my hypotheses about the customers were correct. (Yes, Virginia, even end customers can't always explain to you what they really want. Accurately.)

So, with agile project management, we are learning about what the project is and how to do the project and who the team really is. At that same time, the business lead is learning "what really is the business value here".

"As you from crimes would pardon’d be,
Let your indulgence set me free"
- Shakespeare, The Tempest

The business lead must accept the Team is learning, and they must accept that the business lead is learning.

Now, the fact that we are learning does not mean we start with totally sloppy thinking or no thinking. We need to make a relatively quick first estimate (hey, it might even be accurate enough). And then test that. I would not suggest starting a project just on the hunch of a "business lead" who has no track record of successful hunches.

A couple of suggestions:

• Demand to understand the business value of your project (be reasonable in how you put this)
  
• Talk about it (anyone might have a contribution)
  
• Talk about it some more; see if everyone is motivated by the business value as articulated so far
  
• Develop an approach together to getting more confirmation that the business value of your project is really there (Hint: incremental releases might be part of that approach.)
  

We have some more things to say about business value, and then we will talk about the relationship between a SW project and a process.

+ Joe Little