NEW YORK (AFX) - Web portal business Yahoo Inc. had a rough year, and investors paid the price.
Throughout 2006, the Sunnyvale, Calif.-based company lagged far behind the No. 1 search provider in the U.S., Google Inc., in terms of the number of searches performed on its site. More searches mean more opportunities to display relevant text-based ads next to search results, an advertising tactic that has proven a veritable pot of gold for Google.
Yahoo continued work on 'Project Panama' this year, a much-anticipated and long-delayed set of improvements to its search and online advertising technology. Google's method for delivering the most contextually relevant ads is widely considered better than Yahoo's, but the Yahoo upgrade is expected to help close the ad-revenue gap with Google.
In July, Yahoo announced Panama would be delayed again, and analysts said they don't expect to see a boost in revenue until well into 2007. Investors sent shares down 29 percent on the news.
Another sell-off was sparked in September when Yahoo warned a slowdown in automotive and financial services advertising would constrain third-quarter revenue to the low end of guidance. Yahoo's stock fell 11 percent on the news.
A month later, Yahoo was hit again when Google closed a deal to buy YouTube, a video-sharing startup Yahoo itself was said to have pursued. Pressure mounted for Yahoo to acquire social networking site Facebook, but the rumored $1 billion deal never materialized.
The year was not without some bright spots for the company: Yahoo expanded its mobile advertising efforts in the U.S. and made a deal with eBay Inc. to exclusively provide the online auctioneer's display advertising. It beefed up its free Web-based e-mail and online real estate offerings, and launched a cobranded video site with Al Gore's user-generated TV and Web video venture, Current TV.
The company also tried to match Google's experimental foray into newspaper advertising with one of its own. In November, Yahoo teamed with more than 150 newspapers -- including the San Jose Mercury News and the Dallas Morning News -- to provide online classifieds and other advertising services.
Yahoo has long clung to its spot as the most-trafficked Web site in the U.S., but that honor slipped away this year. In November, online hangout MySpace, which is owned by News Corp., clocked more page views than Yahoo, according to comScore Media Metrix. (Yahoo remained top dog in terms of unique visitors that month, comScore said.)
In December, Yahoo responded to the year's woes with an organizational overhaul. The company said it will consolidate operations into three groups focused on its audience, advertising network and behind-the-scenes technology, and made some top management changes. Chief Financial Officer Susan Decker was tapped to fix the company's advertising problems. Lloyd Braun, a former television executive hired two years ago to run Yahoo's media division, left the company, and Dan Rosensweig, Yahoo's chief operating officer since 2002, will step down in March.
Shares of Yahoo sank about $10 in the calendar year, or 29 percent, to close at $25.36 on the Nasdaq Thursday. The stock hit its one-year high of $43.66 in early January, and bottomed out at $22.65 on Oct. 20.
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