Guru,
You asked me a question awhile back and I'm not sure I answered it. So if you're still waiting, please let me know what it was (I'm not talking about the where-do-you-live question, which I'll leave at "a Chicago suburb" for now, if you don't mind. How 'bout those Bears last night?)
I also wanted to respond to your latest post. I am a fellow believer in YHOO's current overvaluation, though probably not to the same extent. But I think your post overstates the threat from the revenue sources you identify.
<As you have heard me say by now, 8% of revenue comes from Softbank. This is fact. Lets not argue. BTW, that is up from 1% in the second quarter when it was 1% and therefore accounted for one-third of revenue growth. >
I'm not arguing the numbers. Even Sweetpete, the resident leader of the YHOO longs over on the YHOO board, confirmed the numbers, didn't he? So the question is, what do you do with it? Well, I would start with an analysis of who the Softbank "affiliates" (not really in the legal sense; maybe "relatives" is a better term) are. The most prominent one, I think, is E*TRADE. Using them as an example, don't you think E*TRADE, which is heavily advertising everywhere (from NFL football to the CNBC ticker to every portal they can find) would still be advertising on YHOO regardless of the Softbank investment in both companies? I think they would. The most Softbank might do is try to convince E*TRADE to steer a little more of that revenue YHOO's way. But as far as I know, Softbank is a minority shareholder/investor in both companies. If the companies want to place the ads elsewhere, they are free to do so. And they do. The real driver of the revenue growth there was E*TRADE's general strategy, which is *not* YHOO-specific, to intentionally lose money by pouring it into advertising in hopes that they would amass a large base of new customers. I'm not sure that will work, but if it does, YHOO will have more revenue than it knows what to do with in later quarters.
My point is this: I don't think it's appropriate to label the entire 8 percent as unsustainable income. I would venture that only a small portion of that is truly unsustainable. You have used the term incest and made references to the Japanese way of doing business in describing this problem in the past. Setting aside the ethnic stuff, the Japanese corporate model has in fact used interlocking supply arrangements among companies of common ownership groups as a way to prop up underperformers. They've done business that way for years, and a portion of their present problems can be traced to that.
So you're correct, I think, to point it out. But at that level, when at least for E*TRADE it makes perfect sense for them to advertise on YHOO and they do it at competitive rates, is it really "incest"? I would analogize it more to the time when I was in college and my older brother sold me his car (a lousy car, as it turned out). He did me the "favor" of letting me take over his payments, which were roughly equivalent to the market price for the car. I got my first car, he got his money. I was neither worse nor better off economically for the transaction versus a transaction with an unrelated party; neither was he.
As for the smut, in the early days many of the denizens of the net had a lot in common with Pee Wee Herman. But society, fortunately, has little in common with Mr. Reubens. The true potential of the Internet is in ordinary citizens embracing it as a way to shop, to bank, to communicate, to inform, to research, to do things that haven't even been imagined yet but are probably being thought of in a cubicle in Santa Clara right now. The future is *not* in connecting people to the latest pictures of teen sluts. If it is, the market size of the audience is so limited that YHOO wouldn't be worth $5 per share. Think of it this way. Who brings in more revenue: Disney Corp. or the Playboy Channel? And by how much? If I were a YHOO long, I'd rather see YHOO abandon the smut channels altogether and concentrate on the majority of people with better things to do with their time.
MAD DOG
P.S. -- Welcome to the board, BTW. It's easier than wading through the YHOO board when your time is limited.
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