CEO: Yahoo Feeds on Competitive Threats

 
 
By Michael Liedtke  |  Posted 2004-05-13 Email Print this article Print
 
 
 
 
 
 
 

After watching online search engine leader Google dominate business headlines for weeks, Yahoo used a series of executive presentations to remind analysts that the company is an Internet powerhouse determined to grow even bigger.

SAN FRANCISCO—After watching online search engine leader Google Inc. dominate business headlines for weeks, Yahoo Inc. used a series of executive presentations Thursday to remind analysts that the company is an Internet powerhouse determined to grow even bigger. A few minutes after the Frank Sinatra song "The Best Is Yet to Come served as a musical prelude, Yahoo CEO Terry Semel set the self-assured tone of the daylong meeting by insisting that the Sunnyvale, Calif.-based company feeds on competitive threats. Without mentioning names, Semel made veiled references to longtime rivals Microsoft Corp. and AOL, as well as "one or two upcoming companies.
After acknowledging that these companies have become major players in some Internet segments, Semel cautioned Yahoos foes.
"My advice is to beware, Semel said. "All we want to do is win. Its the only thing that excites us. Other Yahoo executives exuded the same sort of confidence on a day when the company raised one of its major long-term goals from 10 million subscribers to 15 million subscribers who pay for Internet access, online matchmaking, premium e-mail and other special services. The company didnt set a deadline for hitting the new target. As of March, Yahoo had 5.8 million subscribers, up from 600,000 two years earlier. Yahoo made reaching the new subscriber goal slightly more difficult by announcing plans to offer 100 megabytes of free e-mail storage, up from four megabytes currently. The company has been charging $19.79 to $49.79 annually for 25 to 100 megabytes. The change, which will become effective this summer, is being made six weeks after Google unveiled an e-mail service that will offer each account 1,000 megabytes of free storage.
Although the companys name was rarely mentioned, Googles specter loomed over Yahoos annual showcase for Wall Street. Already one of the best-known technology brands, Google pushed its profile to new heights by filing plans for a hotly anticipated initial public offering of stock. The IPO indirectly affects Yahoo because the deal figures to give Google the financial muscle to make investments and acquisitions that could make it an even more formidable competitor. If Google realizes its IPO fund-raising goal, the Mountain View, Calif.-based company will have $3.2 billion in cash, roughly twice as much as Yahoo had through March. The IPO also will enable Google to use its highly prized stock to finance acquisitions. Googles financial muscle initially rattled Yahoo investors, causing the companys market value to drop by 9 percent during the first few days after the April 29 IPO filing. The stock has been rebounding, however, as more people conclude that Yahoo remains well positioned. Yahoos shares gained 2 cents Thursday on the Nasdaq Stock Market to close at $27.10—3 percent below the split-adjusted price before Googles IPO filing. Yahoo, formed four years before Google, left little doubt that it intends to outpace its surging rival. "We will continue to lead and not follow, said Dan Rosensweig, Yahoos chief operating officer. "We know where the Internet is going. In trying to illustrate its advantage, Yahoo emphasized that it runs the worlds most popular Web site with 141 million active users,putting it in the financial drivers seat as the Internet advertising market continues to grow from its 2003 level of $7.3 billion. Some industry analysts expect that number to double within the next four years. Advertising and other paid online listings account for 88 percent of Yahoos revenue. Google depending on advertising for 96 percent of its first-quarter revenue. Unlike Yahoo, Google until Thursday only sold text-based ads. Now Google is testing banner ads that will be distributed to other Web sites in its marketing network. Google has no plans to post banner ads on its own Web site—a destination that became popular largely because company co-founders Larry Page and Sergey Brin disliked the cluttered look of pages with lots of graphics. Yahoo gave Google credit for its leadership position in online searching—an area where Yahoo is spending heavily to gain an advantage. In Thursdays presentation, Yahoo rated its search brand strength as "moderate while praising Googles as "strong.
 
 
 
 
 
 
 
 
 
 
 

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