Google Edging Out Yahoo

Google, it would seem, is breathing down Yahoo's neck with its announced acquisition of YouTube. Yahoo, in recent weeks, negotiated a price and terms for YouTube but when the talks broke down, Google was quick to step forward in yet another instance of Yahoo appearing to be both late and slow in its business dealings.

Yahoo boasts more than 400 million users per month making it the world's most popular web site. It is a major advertising marketer and has top offerings in email and music. The management team, led by former Hollywood executive Terry S. Semel, has a reputation for skill and financial acumen.

Some industry analysts feel, however, that Yahoo is losing momentum in advertising, video programming, and social networking. Shares in the company are down 38 percent for the year.

Google is taking full advantage of this situation and has concluded a series of strong deals. In addition to the purchase of YouTube for $1.65 billion in stock, Google paid $1 billion for 5 percent of AOL including the right to sell text ads next to search results. Over three and half years, Google will pay $900 million to sell ads on MySpace.com. Google has, then, effectively neutralized Yahoo's competitive advantage.

A particular disadvantage for Yahoo is the frozen state of its text advertising business pending a software upgrade already a year overdue. In the meantime, Google earns more money per page than Yahoo and has grown wealthier with a greater stock market value. Google currently has a market value of $131 billion to Yahoo's $34 billion and has $11 billion in cash to Yahoo's $4 billion.