Can You Really Make Mad Money With Advertisers?+ Vic Wisemann’s Thoughts on: GOOG, MSFT, KO, IBM, MCD, YHOO, EBAY
 InvestorsObserver Featured Contributor Vic Wisemann |
What is the most valuable logo in the world? The market-research firm Millward Brown annually conducts a survey to determine the economic worth of the world's brands and to put a dollar value on the many corporate logos visible to each of us nearly every day. For the past three years, Google (GOOG) has claimed the top spot valued at more than $100 billion.
It is a bit ironic that this behemoth of the advertising world has achieved the top spot with very little advertising about itself. Other companies like Microsoft (MSFT), Coke (KO), International Business Machines (IBM) and McDonald's (MCD) spend enormous sums to stay in the consciousness. Google, which makes most of its money from ads, rarely advertises itself. Telling the world how well it does what it does just isn't Google's way.
Google has built its fortune almost entirely on the back of small text ads, which appear alongside its search results and on sites across the web. Having a virtual strangle hold on this revenue stream, the company is now setting its sights on graphical display ads. Many believe these types of ads will be the major revenue generator in the coming decades. The only problem is: this business model is dominated by Yahoo! (YHOO).
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Yahoo! has about 580 million visitors around the world every month. The company is introducing a global branding campaign to underscore its strengths with consumers and advertisers. Backed with a budget of more than $100 million over the next 15 months, the campaign is the biggest for the company and the first that is global in scope. Yahoo!'s new tagline, “It’s Y!ou,” is intended to echo changes in its leading products, like its home page, mail and search services, which have become easier to personalize.
The driver behind YHOO's future success will, however, continue to be its prowess in graphical display ads. As one of the web’s biggest publishers, and a seller of ads on a network of top sites like eBay (EBAY) and hundreds of newspapers, Yahoo! is the king of the display advertising business. In 2007, Yahoo! bought Right Media, a pioneering ad exchange whose business has grown steadily since, in part because many of the ads that run on Yahoo! are brokered through it. An ad exchange is a market where advertisers and publishers can buy and sell advertising space, filling spots in web pages on the fly.
Ad exchanges have been hailed as the future of the industry for some time, yet they only account for between 10 and 15 percent of the display advertising business today. Recently Google said their new system, called the DoubleClick Ad Exchange, will greatly simplify the process of buying and selling display advertising, allowing many more publishers and advertisers to benefit from it.
It is, however, unlikely that the DoubleClick exchange would catch up with Yahoo!’s exchange within the next year. But the Google exchange could become dominant over the long term. To keep its hopes of usurping Google, Yahoo! must prevent that from happening.
As Yahoo! prepares to do battle with Google, they have a few points in their favor. The company sports a fat wallet and management appears to be effectively allocating total resources to generate profits. The company's long and short term debt ratios are in line with industry averages, reflecting a solid financial condition. Although, demand for the company's products and services needs to show some improvement.
To address this issue, Yahoo! is joining forces with the other 800 pound gorilla in the room, Microsoft. If the partnership is approved, Microsoft will take over Yahoo!'s search engine with its new search engine, Bing. The Yahoo! deal could help Bing beat Google by massively expanding its market share to a potential 26%.
This battle will most likely play out over a number of years or even decades, but you can put some nice profits into your account now with a shorter term spread trade. For a hedged trade on YHOO, consider the November 15/12 Bull Put spread for a 35 cent credit. That's a 13.2% return and the stock has to fall 11% to cause a problem.
Because this is a shorter term trade, in less than 60 days you can run the whole program again with YHOO or GOOG or another player. That's the beauty of these trades. In two months this battle could be at a stalemate, but steel may be heating up. When this trade expires, you can easily transition to other areas. Remember: these trades, like all trades in the stock market, are not without risk, so be sure you understand the risks involved before you put your money into play.
If you have any additional thoughts, ideas or great ad campaigns, please e-mail me at
vwisemann@InvestorsObserver.com.
FREE for 90 days: Get the InvestorsKeyhole Service and our other premium investor services. Plus Over $1,000 In FREE Bonuses! CLICK HERE to begin your 90 DAYS FREE. We can make this 90 day FREE offer because we are confident you will find our service an essential part of your investing toolkit and stay a subscriber for many years to come. Our biggest risk is that we do find people cancel their subscriptions when they move to their own private islands without internet access. |