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The Search Is On for Yahoo

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May 14, 2004 11:37 AM PDT    Text size: 
SUNNYVALE, Calif. – The search is on for Yahoo Inc., or at least that's what the web portal said at its annual shareholder meeting in San Francisco this week as company executives mapped out their strategy for the coming year.

During the nearly three-hour meeting in which Yahoo executives avoided mention almost entirely of immediate search engine rival Google, predictions for vast growth in the search technology sector played a prominent role in Yahoo's forecast for profit growth.

Yahoo officials said that the market for Internet searches will grow from a $3 billion to $11 billion industry over the next five years as Internet users increasingly lean toward acquiring regional search information. With that demand will come additional advertiser dollars, which Yahoo believes is a gold mine that leading search engines have only just begun to tap into.

"We think now is the right time to go after the local market," said Ted Meisel, president of Overture, which is Yahoo's search engine. "We are seeing users start to look for local information and we see commerce opportunities in local search. We are going to make it easier for advertisers to participate."

According to statistics from Yahoo, with the continued rollout of high-speed service in rural areas, more and more users are using search engines to find local or region-specific information. In addition, small businesses typically spend an estimated $22 billion yearly on ads in the Yellow Pages, newspapers, and direct mail – a revenue stream that can possibly be re-directed into search engine pockets.

In March of this year Google made similar moves to capitalize on local search results by introducing the beta phase of a new search feature that localizes search results and enables users to find information on people, businesses, and services closest to their homes or desired locations.

Google's launch of Local Google is based on new algorithmic formulas that can generate information as finite as people's home telephone numbers, zip codes, or the local grocery store.

Google's director of consumer web products claims that 70 percent of Google users are interested in local business information search results.

However, while Google may have gotten a head start in going after the local search market, Yahoo still retains the belief that it has a competitive advantage over Google.

Yahoo's reported net income for the first quarter of 2004 was considerably higher than Google's, and it hosts 141 million registered users who visit the web portal each month to access email, check the online yellow pages, and use its numerous online services.

Yahoo reported first-quarter revenue of $758 million and net income of $101 million, whereas Google reported sales of $389.6 million and net income of $63.97 million in the same period.

How Google's pending initial public offering will affect the balance of the two competitors remains unknown.

Yahoo chief executive Terry Semel also stated at the shareholder meeting that he intends to increase Yahoo's roster of paid subscribers from 10 million to 15 million over the coming year.

"We have a lot of wind at our back leading us to believe the best is yet to come," a Yahoo executive stated at the meeting.

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