The chief executive of Yahoo has announced that his company is positioned to compete with main rival Google even if that company pulls off its much-anticipated blockbuster public offering.
CEO Terry Semel said search is expanding into new areas, opening up enough opportunities for both companies to co-exist in the space.
“There is plenty of room for Yahoo to thrive and for Google to thrive,” Semel said at a Milken Institute conference in Los Angeles. “Yahoo is a company that has always had good competitors, and Google will be a good competitor.”
The comments are the first from Yahoo on its prospects for competing head-to-head with Google after an IPO that could net Google billions of dollars in cash and give it a market capitalization of as much as US$20 billion.
With that financial leverage, Google could seek to expand through acquisitions — the same strategy Yahoo used when it went on a billion-dollar search buying spree last year, adding Overture and Inktomi to its technological arsenal.
Semel noted that both companies have expanded well beyond search, with Yahoo focusing on the potential for search to become an integral part of the online shopping experience.
“Search has become a lot more than search,” Semel said.
Making Up Ground
For his part, Piper Jaffray Internet analyst Safa Rashtchy said Yahoo was slow to realize the value of search from a money-making standpoint but has invested heavily to make up any lost ground.
“There was a time when search wasn’t seen as an important part of being a portal,” Rashtchy told the E-Commerce Times. “Fortunately, [Yahoo was] in a position to take advantage of the tech downturn to arm themselves with the technology they need to compete in that space. And they also have the potential added value proposition of already being a portal that millions of people visit every day.”
Level Playing Field?
Google has yet to formally declare its intentions regarding its IPO, though it kicked off this week by tapping Credit Suisse First Boston and Morgan Stanley as lead underwriters for the offering. Additionally, the company apparently faces an April 30th deadline to divulge financial information because of its revenue levels and its number of options-holding employees and stakeholders.
Although Google would receive an immediate windfall of cash from a public offering and would have millions of shares of stock to use as currency in transactions, its founders reportedly are reluctant to give up control of the company, which grew from obscurity to become a household name in just a few years, roaring past several more deeply entrenched search companies in the process.
Three’s a Crowd?
Most analysts agree with Semel’s assessment that there is room in the search marketplace for more than one major player. But Forrester Research analyst Charlene Li noted that Microsoft will crash the party later this year, and AOL reportedly has been mulling plans to use its members-only platform as more of an open Web portal.
“Just like there are several television networks, there’s room for multiple search players,” Li told the E-Commerce Times. And just as few television viewers watch only one network, she added, “users would probably jump from one to the other, depending upon what they want to find.”
Ironically, the Google IPO actually may provide a fringe benefit to Yahoo, which owns an estimated 5 percent of its search rival — an investment that was made in 2000. Until earlier this year, Yahoo even used Google search results.