Trend: Google's technology continues to provide a competitive advantage in search engine results pages ads.
Jim Jubak describes Yahoo's search advertising problem in MSN Money.
...shares of Yahoo (YHOO, news, msgs) fell 12% on Jan. 18 after the company came up a penny short when it announced fourth quarter 2005 earnings. No, that wasn't Wall Street's all-too-frequent overreaction to an inconsequential shortfall.
What drove the stock down wasn't the earnings miss but the company's admission that it had fallen way behind in its efforts to roll out new technology to compete with Google (GOOG, news, msgs). Yahoo's problem is that its search engine is less efficient at matching users' searches to the ads it displays. The result is that the ads Yahoo props on the web page that shows the search results get less click-through than the ads on a Google page. Yahoo's click through may be only half that of Google's, estimates Citigroup.
Since advertisers on the Internet pay per click, you can see Yahoo's problem. New search technology is supposed to make the ads Yahoo surfaces more relevant -- but in its earnings announcement Yahoo said it would introduce its new technology "deliberately" over the coming year. Wall Street decided that "deliberately" means late and that’s what crushed the stock.