For those who were concerned when Yahoo! Inc. (NASDAQ: YHOO) missed its date for the new Panama search and advertising platform, forget about it.
Several companies, most notably InterActiveCorp's (NASDAQ: IACI) Ask.com, say that their search technology is better than Google's, yet only get a few market share points in the search market when the numbers come out each month. At most.
Panama my be good, but Google Inc. (NASDAQ: GOOG) is good enough. Internet users who use search have given Google about 50% of the market, leaving Yahoo! and Microsoft's Corp (NASDAQ: MSFT) MSN as distant No.2 and No.3.
Habits are hard to change. Even if Yahoo! Panama delivers slightly better results for advertisers and searchers, there will be no whole scale migration to the product. Among other things, Wall St. and the business press have left Yahoo! for dead. Techies don't like to do business with companies that are warding off buzzards. Bad public image may not equate with bad technology, but it's close.
Just like Yahoo! is trying to get back into search, Google has tried to get into the online payment business. The company undoubtedly put a lot of money and R&D into Google Checkout and priced it to compete with the dominant eBay Inc. (NASDAQ: EBAY) PayPal system. But the PayPal lead appears to be too great even for Google to crack. Time will tell, but there does not appear to be a migration away from the eBay online payment system.
Even if Panama had hit its May launch date, it is questionable it would have made a difference for Yahoo! in its competition with Google. Coming even later to the game is not likely to help Yahoo! at all.
Douglas McIntyre is a partner at 24/7 Wall.
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Reader Comments (Page 1 of 1)
10-16-2006 @ 2:37PM
sigh said...
Thanks Douglas for a balanced review. There is something called network effect along with behaviourial change that makes it difficult penetrate google and paypal.
"The network effect occurs when the value of a particular good or service increases for both new and existing users as more people use that good or service. It can also occur when other firms design products that complement an existing product, thereby enhancing that product's value. The network effect is arguably one of the most potent competitive advantages, and it can also quickly catapult firms to the lead in new industries."
10-16-2006 @ 4:16PM
Jeremy said...
You misunderstand Pananama. It is not about improving search results -- Yahoo! search results from a consumer perspective have been equally relevant to Googles for a while -- it is only about improving the ranking of link ads, and therefor click through rates, and therefore revenue per search. Your analogy with paypal is inaccurate. Panama is not an attempt to win new consmers/market share, it is simply getting more revenu for Yahoo and for advertising partners per search that they currently DO get.
10-16-2006 @ 4:20PM
ag said...
One little appreciated aspect of Google checkout is that Google gives credits to sellers for payments processed through Google Checkout. These credits can be used to buy Google adwords. This aspect of Google checkout makes it cheaper than Paypal.
10-16-2006 @ 4:47PM
John said...
I think Jeremy is correct. From what I've read, Project Panama is about improving Yahoo's advertising platform, not its search engine.
10-17-2006 @ 10:26PM
Fru said...
This article seems rather poorly researched when it claims that Panama is a search and advertising platform. As others have mentioned, Panama is purely the advertising platform - specifically the textual pay-per-click listings platform. It has nothing to do with the quality of the algorithmic web search results other than that Panama is used to serve the text ads relevant to the search results page.