Amid rampant speculation of Yahoo’s (NASDAQ:YHOO) sale, the company’s recent partnership with ABC News can boost the company’s already 680+ million strong unique visitors per month. [1] However, this may not necessarily mean increased revenue for the company’s online advertising business, given that monetization of traffic has been an ongoing problem for Yahoo. An erstwhile Internet giant, Yahoo is struggling is the search and display advertising space amidst competitors such as Google (NASDAQ:GOOG) and Facebook.
We have a revised price estimate of $18 for Yahoo’s stock, which is about 30% above the current market price.
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Unfortunately, Online Media is Not the “In-Thing” Anymore
Yahoo News and ABC News have a combined online audience of 100 million visitors in a month – a big number. While this certainly adds on further to Yahoo’s 680 million unique visitor base, it raises the age-old dilemma Yahoo has been facing - media vs. technology. Declining advertising revenues have afflicted media giants on an industry-wide basis, including AOL (NYSE:AOL) and even New York Times (NYSE:NYT) – a company known for its top-notch journalism.
Traffic is Not the Answer to Yahoo’s Problems
Yahoo’s core challenge remains to translate this audience into advertising revenue, something which Google and Facebook have successfully achieved due to their heavy involvement in the current mega-trends of social networking and mobile usage. Unfortunately, the partnership with ABC News does not immediately seem to reflect any of these trends, being restricted to content-sharing and increasing traffic to Yahoo News. While the announcement may divert some attention from Yahoo’s speculated sell-off, whether it makes a significant difference to Yahoo’s top-line growth remains a big question.
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