Yahoo! versus Google revenue streams
By Charlene Li
Yahoo! posted its Q1 2005 results today, with top line revenues of $821 million (which excludes traffic acquisition costs). I just finished my online ad projections and have been looking at the revenue streams of players like Yahoo! and Google very closely. Several financial analysts have projected that half of Yahoo!'s revenues come from search, and another 30% comes from the sale of banner ads.
The inevitable comparisons to Google come up -- Yahoo! doesn't have the search traffic and publisher network that Google has, and so lags in search revenues. But what I like about Yahoo!'s strategy is the robust nature of it. It can tap into multiple revenue streams -- especially emerging branding dollars that come with video and rich media ads. In contrast, Google is a one-trick pony (albeit, it's a very nice looking pony!)
This brings up the possibility of Google starting to tap into all of those burgeoning branding dollars. Google has relationships with over 200,000 advertisers and thousands of Web publishers taking text ads. How hard would it be for them to start taking and placing banner ads through AdSense? I expect that Google will enter the banner ad network market within the next year and a key question will be how they will ensure the quality of that network for advertisers. It should be interesting to see how quickly the Google pony learns new tricks.
Update: Thanks to Brad for pointing out some convoluted wording on my part. AdSense for Content does allow graphical ads as an alternative to text ads in its contextual listings. But these ads are still paid for on a CPC basis, where purely branding activity (aka no clickthrough action) is penalized. What I'm invisioning is Google starting a purely branded advertsing network, based on CPM. I know it runs counter to what they have been all about, but if you buy into the what's happening on the major portals, I bet smaller sites would be interested in tapping into that display advertising as well. The trick: using Google's contextual keyword matching engine to effectively target the right ads to the right page.