Google vs. Yahoo: Clash of cultures

Google -- in roughly the same time span -- has broadened its business to do something its executives said they didn't want to do: Become a portal like Yahoo that offers services like free Web e-mail, social networking, publishing tools, maps, shopping, news and video search, and now brand advertising sales.

"There's a constant focus on each other," said a former Yahoo employee who asked to remain anonymous. "We (would) know everything they're working on, they (would) know everything we're working on."

They're fighting over a bigger cut of the currently US$8 billion global search advertising business, which is expected to be worth US$22 billion in five years, according to Piper Jaffray. What's more, search ads are increasingly part of lucrative brand advertising campaigns. Worldwide online brand advertising is expected to grow 21 percent this year from US$11.3 billion to US$18.2 billion, according to Goldman Sachs.

Terry Semel
Terry Semel
CEO, Yahoo
So far, both companies are prospering. In the first three months of the year, Google reported revenue that doubled year over year to US$1.26 billion with net income of US$369.2 million, nearly six times more than in the comparable period in 2004. Yahoo's revenue during the same time rose 35 percent to US$1.17 billion and net income doubled to US$205 million. Yahoo's market capitalisation is US$51 billion; Google's is US$76 billion.

But the approaches these two companies are using to go after the same advertising dollars are remarkably different, and are a reflection of the skills of their top executives.

Semel shakes up Yahoo
Semel arrived at Yahoo at perhaps the lowest point in its history, replacing popular chief executive Tim Koogle four years ago. He brought with him a reputation as a no-nonsense businessman with an eye for the big picture and a Rolodex filled with Hollywood contacts.

A year later, Semel brought in Dan Rosensweig as the company's chief operating officer. Rosensweig, a former executive at CNET Networks (the publisher of News.com), clamped down on spending and made individuals accountable for the profitability of their divisions.

That's not to say they didn't spend aggressively on acquisitions. From 2002 to 2003, Yahoo bought search engine Inktomi for US$235 million, employment site HotJobs for US$436 million, and commercial search pioneer Overture Services for US$1.7 billion.

Yahoo has taken a less financially risky approach in the last year despite its growing profits. It's been systematically examining and buying upstarts in up-and-coming markets. An example is last week's acquisition of voice over Internet Protocol (VoIP) company DialPad. Others have included the photo-tagging site Flickr and e-mail company Oddpost. All the recent acquisitions were so small they didn't significantly impact earnings, so financial terms were not disclosed.

Yahoo, many analysts believe, is entering a new era as a media company rather than a tech innovator. It's been building a Hollywood headquarters and an entertainment team under newly hired Lloyd Braun, a former ABC executive. Sources say that Semel will spend more of his time there. In Hollywood, the company will be in a better position to strike partnerships, license content and create new original programming.

Larry Page
Larry Page
Co-founder, Google
That's not to say Yahoo is ignoring its own technology, which proponents say gets the short shrift when compared with Google. When Yahoo acquired Overture, it also landed AltaVista, one of the oldest search engines on the Internet, along with Inktomi. Top-notch engineers came with the acquisitions. Yahoo also recently hired Ysama Fayyad, a rocket scientist from NASA's jet propulsion team, to head up its research labs.

"The technical skill that it takes to scale (products) for 400 million users is something Yahoo hasn't been given credit for in the past. It requires rocket science," said Yahoo spokeswoman Joanna Stevens.

Yang also spearheaded an effort to attract top engineering talent.

Called Project Guru, the initiative is meant to encourage staff to scout for experts in various fields such as search algorithms and Internet communities.

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Talkback 5 comments

  1. Who is Yahoo? Anonymous -- 22/06/05

    Who is Yahoo?

  2. Does Yahoo even matter anymore? There offerings keep getting trumped by Google. For anyone who wants to see what Hollywood type management gets you, you don't have to look any farther than the film and music industry. Stagnant, dull, unable to Anonymous -- 22/06/05

    Does Yahoo even matter anymore? There offerings keep getting trumped by Google.

    For anyone who wants to see what Hollywood type management gets you, you don't have to look any farther than the film and music industry. Stagnant, dull, unable to do anything remotely creative.

    In other words, crap.

  3. Google has more Goatse! http://www.google.com/search?hl=es&q=large+heart+soap+vanda Click the first link. GGs hope you like it! :) Anonymous -- 22/06/05

    Google has more Goatse!

    http://www.google.com/search?hl=es&q=large+heart+soap+vanda

    Click the first link.

    GGs hope you like it! :)

  4. The two search engines are completely different in their audiences, intended or not. The tech savvy tend toward the minimilist interface of google while the technologically impaired tend towards yahoo. I personally can't stand yahoo due to the blatant a Anonymous -- 22/06/05

    The two search engines are completely different in their audiences, intended or not. The tech savvy tend toward the minimilist interface of google while the technologically impaired tend towards yahoo. I personally can't stand yahoo due to the blatant and rampant commercialism of the site. Sure they are both their to make money, but at least google doesnt deluge me with a million paid links to every kind of thing but what I am looking for... Yahoo's interface is too busy and panders to the lowest common denomonator. That and the fact that I am sick of those damn yodelling commercials.

    1. yahoo vs google Anonymous -- 19/02/08

      perhaps google is more subtle true but thats about to change with google ads video. i am bombarded by ugly looking ads by google everyday its horrible esp when people tie it into their to trick you into clicking on that link. i know this is 3 years late but if you had to re-evaluate this article for todays time. You would still see google on top but yahoo has definitely improved themselves. Google as a company is not innovated or evolutionary as suggested by this assuming bollocks but rather they are more of a company seems to do things a little better with tried things.

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