Yahoo! Needs "Plan B" After This Week More Than Ever

This week has been one of the darkest for Yahoo! since our "Plan B" group started pushing for change at the Internet company on January 7th. From the first day after our campaign launched, Yahoo!'s stock price has been positive and ahead of Google's -- sometimes far ahead.

There was a time, a few short weeks ago, when Yahoo!'s stock price was up 13% while Google's was down 13% since the shareholder advocacy launched. Tonight, in the after-market trading, Google surpassed Yahoo! for the first time since the early part of this year in terms of percentage gains. In fact, today is also the first day since our launch when Yahoo!'s stock price is below where it was on January 7th.

As a shareholder group which believes in the long-term growth potential of Yahoo!, this has been an incredibly difficult week. Our group lost $7 million in shareholder value - from $61 million last week to $53 million tonight. Of course, we're in the same boat as all Yahoo! shareholders.

There's no question that the market got way too jazzed up about the "quick-fix" impact of Panama on Yahoo!'s results. There was also a bit of "Google-had-its-time-in-the-sun-for-the-last-2-years-so-it-must-be-Yahoo!'s-turn" stock-picker mentality driving the jump in Yahoo!'s stock price.

Several months ago, we cautioned that Panama was no cure-all for Yahoo! The biggest issue facing them is a continued loss of share in search. It's still an issue. Because of this, revenue growth has been steadily declining in each of the last 4 quarters. As Anthony Noto noted, it will be difficult to suddenly escalate the single digit growth to 20+% by end of year.

This has been a difficult week for Yahoo!'s shareholders: a difficult Q1 that stands out even more when compared to eBay's and Google's stellar results announced in the days afterwards.

Our group has offered a plan to improve Yahoo! We are asking other Yahoo! shareholders to join our group and support us.

We believe in this company -- today, more than ever. Some Yahoo! shareholders have sold their stock as a sign of their displeasure (this selling continued, concerningly, today). That's their right. However, our shareholder group wants to be part of the solution. We believe there is still tremendous unlocked potential in this great company which possesses some of the best people in the technology world.

We support Yahoo!, but shareholders need "Plan B" today more than ever.

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From Seeking Alpha: Yahoo - Expectations Too High For Panama?

Larry Dignan (ZDNet) via Seeking Alpha this morning has asked some important questions about the market's reaction to Yahoo!'s Panama system:

The early word on Yahoo's Panama ad system has been good. Perhaps too good, according to one analyst.

Todd Greenwald, an analyst at Nollenberger Capital, said in a research note this week that Yahoo's Panama system "is not an end-all, be-all savior." Greenwald, who started coverage of Yahoo with a neutral rating, says that early chatter about Panama's success has been "inconclusive for the most part."

Greenwald's biggest concern: Expectations are too high for Panama. Given the reaction of Yahoo shares, up 40 percent from recent lows, it appears as if investors are assuming that Yahoo will close the price per click gap with Google quickly.

"Expectations for Panama among the media and investors appear very high, with many assuming that it will handily drive much higher click-through rates without any deterioration in price-per-click, closing the monetization gap with Google over the next few quarters."

Indeed, Greenwald adds that it has taken Google five years to refine its text ad algorithms. Meanwhile, Yahoo management has indicated that Panama will take time to "learn" and become more efficient at driving ad prices.

There's no doubt that Panama is critical to the Yahoo turnaround. But thus far there's no hard data on how Panama is performing. That'll change in a few weeks when Yahoo reports its first quarter earnings.

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