The real problem at Yahoo !

Compared with most companies, Yahoo is in good shape.

But Yahoo's problem is that it's compared with Google, one of the fastest-growing and most profitable companies in the world.

Google now makes more money in a single quarter than Yahoo does in an entire year. The contrast represents a harsh comedown for Yahoo, which was the larger of the two companies when Google went public in August 2004.

Despite having more popular products that keep people on its site longer than any other property on the Web, Yahoo found itself a distant second to the awesome moneymaking machine that Google had become. That Google moxie ultimately led to the dramatic management shakeup, with Terry Semel replaced as chief executive by co-founder Jerry Yang.

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Alright, now what ?

Competing with Google in search is costly, and there are no guarantees that Yahoo will ever match Google’s ever-improving algorithms. Even it if it succeeds in narrowing the gap somewhat, Yahoo could make more money by simply outsourcing search to Google :-)

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