Strategy Comparison Report

Yahoo and Google

Yahoo and Google

Basic applications and guidelines making Internet possible have existed for nearly twenty years. However, the principles were launched in 1991 at the CERN -European center for Nuclear Research - through the publication named the new World Wide Web project. Currently, the Internet penetration level is around 22% worldwide and web content may represent more than 988 exabits in 2010. This amount of data, equivalent to Europe's surface all covered by 2 meters of DVD, confers to search engines and data organization systems a key role in the development of new communication ways. Both Yahoo and Google have initially focused their politics in developing high-value search technologies. Currently Yahoo and Google represent 72.8% of Internet requests.

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COMPARATIVE ANALYSIS

GENERAL OVERVIEW

In 2004, Yahoo's total shareholders funds and liabilities were 7,100 millions USD4, around 2, 5 times more these of Google -2,900 millions USD-. Both companies' incomes were similar5, 3,189 millions USD for Google and 3,574 for Yahoo6. However, in 2007, the situation became completely opposite. During the 2004-2007 periods, if Yahoo's total shareholders funds and liabilities grew to 9,500 millions USD, Google's jumped up to 22,700 millions USD. During the same period, Yahoo's incomes doubled at 6,970 millions but Google's incomes rose up to 16,594 millions USD. The two companies' benefits followed the same diversion. They remained stable or in reduction for Yahoo from 839 millions USD to 660 millions USD but again jumped from 399 millions to 4,200 millions USD for Google.

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BALANCE SHEET

For both companies, balance sheet's increase don't depend on liabilities, stable at around 10% of the total value, but on shareholders funds. These equities increased in Yahoo's capital from 9,180 to 12,230 million USD but they literally jumped from 3,300 to 25,340 USD in Google's one.

These massive shareholders investments in Google are probably one of Google's first and strongest strengths against Yahoo. From 2004 to 2007, ventures had a strong belief in the Google business model based on both high-traffic for web search operations and massive advertising development. On the opposite, until 2002, Yahoo used search technology from Google7 and developed its fully automatic advertising platform Panama in 20058 when Google was already ready for it9. This competitive lack of technological innovation in web search and this two years delay in the new web advertising market could explain these differences in the balance sheet. Moreover, through the evolution of assets of both companies, the use of funds cash remained different.

If the operating revenues of both companies were equivalent in 2004, the fixed assets11 in Google were far much lower than these from Yahoo, respectively at 619 million USD and 5,087 million USD. Besides, the working capital used to be 279 millions USD for Google and 432 millions USD for Yahoo. At that time, the employee number12 was 3021 people for Google and more than 7600 for Yahoo. This last point is confirmed while calculating the SG&A of both companies during this ...