Yahoo stabilising - but Microsoft surely worries

(By Philip Carnelley, 21 Oct 09, 09:00) Yahoo’s Q3 results yesterday were in some contrast to Google’s upbeat results last week (see Google Powers On). Yahoo’s revenues were a little better than the markets feared, and profits much better. But even so, revenues were down 12% year on year, at $1.6bn, though flat sequentially. (It’s now approximately one-quarter the size of Google). Excluding divestitures and currency, that's down 7%. However search and display revenue is falling (search down 19% year-on-year) and the gap with Google widening. The company claimed on the earnings call that things are ‘stabilising’ – but that’s not as good as ‘improving.’

Immediate implications for IT markets are that Google is growing its relative power, gaining even more freedom to forge ahead in other spaces like operating systems, enterprise search and hosted applications. Microsoft must be doubly worried, about Google’s power and about the Yahoo partnership. Its own Bing search usage continues to rise, but slowly and from a lower base. In September “Comscore” search rankings for the US, Yahoo fell to its lowest share ever: 18.8%; Google rose half a pp to 64.9% and Bing rose from 9.3% to 9.4%. Even combining Yahoo+Microsoft scores, they fell and Google gained. The gap remains huge.