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Yahoo's Online Services Continue to Deteriorate

It’s a small point but it’s one in a large pattern for Yahoo (YHOO). We still used them for Domain registration which is a fairly innocuous administrative function. When they increased the renewal price 30% to $12.95/year and getting some research done, it turns out that there are services that are much more robust than Yahoo and the best news is that they charge less than half the new Yahoo price.

So one gets vastly improved administration and control at half the cost of Yahoo (again). More importantly, the functionality is improved and every new domain we register is only a third of the Yahoo price.

Yahoo can turn their existing traffic into more money using Google (GOOG), which is perhaps the best indicator of their failure. They are lucky to be getting what they are being offered for their deteriorating online assets. Basically their investment and innovation in building their online services has been far below the market. So their offerings have deteriorated relative to other firms.

there are many things that have gone downhill on Yahoo’s site. Social networking sites and blogs are gaining traffic, traffic that could be going to Yahoo. Much of what Yahoo has now, could be duplicated, perhaps by Google. Google provides similar content and services, such as mail, messenger, maps, etc. and in my opinion, is better. In sum, Yahoo is dependent on creating content and services that will attract visitors to its website.

Yahoo also provides advertising to third parties or affiliate sites, but segment revenue (33%) and margins have been declining. In Q1, segment sales fell 7%, after accounting for the drop in margin (shares more with partner), net revenues declined 13%. Yahoo’s total net revenue increased 9% for Q1. Google’s revenue growth was 42%.

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