Yahoo's comeback!!!

Excerpted from Breaking Views/The New York Times on February 20, 2009

Yahoo! is strengthening its hand. The Internet company has now increased its search market share for five months running. And it just updated its search result listings.

That should make Microsoft and Google lose some sleep. Yahoo!’s comeback makes Microsoft need it more, and shows the search king that its dominance isn’t unassailable.

Yahoo! has been in a free fall since its failed courtship with Microsoft last year. Its stock has dropped to five-year lows and it has undergone a management shake-up in which Jerry Yang, its chief executive, was replaced by Carol Bartz.

Much of its problems can be attributed to the decline of its search business. Yahoo!’s share of the United States search market fell from 30 percent in August 2006 to a low of 19.6 percent last August, according to comScore. But it has risen every month since then, hitting 21 percent in January. Even better, its gains last month seem to have come at the expense of Google.

Yahoo! also just became the first major search company to add images and videos to its paid search listings. That should play to its strength in display advertising.

The company’s search revival puts Microsoft on its heels. It wants to win a part of Google’s cash-cow business, and Yahoo! is showing how a company can do so. Should Microsoft approach the deal table again, Yahoo! will have more leverage. Google should also be wary. The company’s share of the American search market is 63 percent. But Yahoo!’s gains — and its new search technologies — show that the game isn’t over yet. Advertisers are eager for a competitor to Google, and that could spell trouble.

Of course, Yahoo!’s problems are far from over. But at least they don’t seem to be getting any worse.