Yahoo! v. Google: converging strategies but very different results

Yahoo! and Google reported and showed some remarkable differences, even as in fact they have converging strategies.

Obviously, Yahoo! is playing both the search/ads game and the portal game, whereas Google is doing search/ads and applications. Besides, Yahoo! has income from fees and tries to add apps. Google on the other hand earns license fees and is growing its portal ambitions. Add to that that the boundaries between search ads and display ads are becoming more vague, and we can see companies evolving toward each other.

Put differently, it does make sense to compare them.

This Google Spreadsheet is self-explanatory, but maybe some remarks are needed.

• Growth at Google is much steeper, despite its larger base.
• Yahoo! is much less internationally diversified.
• The 'other' source at Yahoo! (fees, mainly from broadband partner and HotJobs) is much more significant than the one at Google (mainly licensing).
• The 'TAC to Affiliate Revenues' ratio peaked at Google at 85%. Being generous to partner sites in giving them by far the largest revenue share is obviously a good way to gain market share.
• Margins are much higher at Google.
• Both are generating lots of cash.
• I used Amazon.com's RoIC definition. Here, they are pretty much alike. The TTM term (trailing twelve months) is also an Amazon thing.
• Calculating the 'per query' ratios, one should use keyword related advertising income only. Since the companies do not provide this information (ad income isn't broken down along the search/display division), I had to make some assumptions. For Yahoo!, I assumed the division is 50/50 and for Google I assumed it is 100/0.
• The 'per employee' ratios of Google are about twice as good as Yahoo!'s.
• Google's P/FCF TTM looks particularly high, but look at the rate at which FCF TTM is growing!