Yahoo sails a steady course at front of fleet

Portal leader Yahoo is poised to stay on top, provided that the company continues to improve its search-engine technology, focus on key markets and develop a site that Internet users want to linger at rather than leave, according to analysts. Given that 39% of Internet users visit Yahoo and that the company has managed, despite tremendous stock market turmoil, to stay focused on its goals, it is unlikely to be overthrown as the portal champion anytime soon, analysts said after Yahoo posted strong fourth-quarter earnings.

Portal leader Yahoo is poised to stay on top, provided that the company continues to improve its search-engine technology, focus on key markets and develop a site that Internet users want to linger at rather than leave, according to analysts.

Given that research indicates that 39% of Internet users visit Yahoo and that the company has managed, despite tremendous stock market turmoil, to stay focused on its goals, it is unlikely to be overthrown as the portal champion anytime soon, analysts from market researchers International Data (IDC) and GartnerGroup said today -- a day after Yahoo posted strong fourth-quarter earnings.

The overarching goal is simple.

"Basically, they want to be the easiest-to-use tool to find things on the Internet," said Gene Phifer, a research director at GartnerGroup. "They don't want to be just a search engine. They don't want to be perceived as just a search engine."

Yahoo is aimed at consumers and, although many use the portal at work, the company's offerings aren't targeted at the enterprise. Phifer doesn't expect that to change. Nor does he expect Yahoo to sit back and enjoy the fruits of a good fourth quarter, which found the company with a net income of US$18.5 million on revenue of $76.4 million, compared to a loss in the year-ago quarter of $1.9 million on revenue of $26.6 million.

"There's competition out there and Yahoo is definitely aware of that," Phifer said. "They're the leader right now, but the worst thing a leader can do is to sit back and rest on their laurels."

While Phifer views other portal sites like Lycos Inc. and Excite Inc. as Yahoo competitors, Barry Parr, director of Internet and e-commerce strategies at IDC identifies only one serious threat: America Online (AOL).

"And that's it," he said, though he also thinks that Lycos and Excite are "kind of in play" to give Yahoo a run.

Phifer also included AOL, the world's largest Internet service provider with 15 million subscribers and counting, on his list of those "nipping at Yahoo's heels," but also finds that that might work in reverse. Yahoo wants also to be an online service, and a free one at that.

"Yahoo has got AOL in their sites," he said. "They're not looking back."

What Yahoo is looking at, both analysts said, is continually improving existing services for consumers -- their primary market -- and adding services that users want.

Advertising is one growth path for Yahoo, even though some analysts and industry observers have been "pooh-poohing the (online) ad market," Parr said. He's not among those naysayers.

"While there have been a lot of bumps along the way, advertising on the Internet is going to become important, and it will be driven by e-commerce," he said, noting that he expects more e-commerce activity from Yahoo in the near future.

Both he and Phifer anticipate that Yahoo will sign a deal with a media company. Parr in particular emphasized that forecast, suggesting that Time Warner Inc. or News Corp. might be likely partners.

In the meantime, Phifer said that Yahoo will keep working on improving its technology to make information on the Internet easier to find. Agent technology and artificial intelligence are two areas the company will continue to work on with the goal of reaching a higher level of personalisation.

"If they can build a profile on you, which they have and which they do, they can intelligently help you find information, all behind the scenes," Phifer said.

Users can create a profile of information, but Yahoo also will keep improving how it uses data gleaned from user searches. For instance, Phifer said if a user has said in a self-created profile that one interest is computer technology, but has been recently searching the Internet for details about automobiles, the My Yahoo personalised section of the site will show information related to both.

Even though the Yahoo search engine is favored by many Internet users, "when you do searching, you still find a lot of stuff that's junk," Phifer said. "You find a lot more hits that are irrelevant to what you want."

Users should expect to see that change in the future. They also should look for incremental improvements in existing services like the calendar, e-mail, chat and the like.

"They're going to continue to provide features that will draw users in and keep them there," Phifer said.

Yahoo, in Santa Clara, California, can be reached at +1-408-731-3300 or at http://www.yahoo.com/.

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