Which Is the Best Internet Bet?
By Mohsin Saeed - April 27, 2013
Mohsin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The Internet-advertisement industry is one of the fastest growing markets in the technology sector. With earnings season in full swing, investors can get an update on which companies are making headway in this space.
Yahoo! (NASDAQ: YHOO) reported its first-quarter results in recent days. The company experienced an increase in profits but a 7% decline in revenue due to weaker revenue performance in Yahoo!'s core business. The entire company is undergoing a massive overhaul led by its new CEO Marissa Mayer, which has been met with positive investor sentiment. At current valuations, I believe Yahoo! has an upside of 30% and is value play for the US advertisement industry.
The US advertisement industry is one of the fastest-growing entities in the entire stock market. This huge industry has been supported by the rise in handheld devices, which ensure that users are connected to the Internet at all times. As compared to PC consumers stuck with bulky devices, which are much more difficult to carry around, handheld users can go online at any time.
This single fact has significantly increased the amount of time that users spend online and is the primary reason behind the high expectations surrounding this industry. According to data collected by Reuters, the US Internet-advertisement market grew by 15% last year and currently stands at approximately $36.6 billion. More data from PWC reveals that the key to growth in this space is handheld devices with revenue from smartphones doubling last year.
Top Tips for Managing Local Ad Campaigns
4/25/2013 - BizReport
The online local ad spend is expected to skyrocket over the next few years as more consumers move to mobile, which offers additional targeting options for advertisers. How can brands stay abreast of new ways to target and advertise without breaking the bank?
by Kristina Knight
Kristina: What are some recommendations you can provide for publishers in terms of additional options for revenue and managing cost?
Lori Chavez, Vice President of Marketing, Local Corporation: Online publishers are constantly seeking ways to manage cost, efficiency and performance of their digital sales and operations. Ideally, they should embrace a strategy focused on both driving top-level revenue and adding new tools to grow ROI. Fusion by Local helps regional media publishers optimize their online properties to drive additional incremental advertising revenue. With millions of searches conducted online every day, publishers should tap into these searches by implementing local business and local shopping directories as additional revenue streams.
Kristina: How do solutions like business directories or syndicated multimedia content fit into the mix, for publishers?
Lori: Local business and shopping directories help publishers to be found in more local searches by consumers. Local Corp.'s local business directory is integrated under the publisher's domain. Implementing the solution is virtually seamless as the directory requires no investment and can be deployed in less than a week.
Kristina: What's ahead this year for Local Corporation?
Lori: We saw record mobile, organic and total search traffic for the first quarter 2013. For the rest of the year, we will be focused on growing revenue and driving our overall performance. We're looking forward to continued success following the launch of Fusion by Local and look forward to helping our advertising partners and publishers better engage with local consumers.
Tripadvisor extreme overvalued and Local Corp extreme undervalued
siteanalytics.compete/local corp = 24,017,606 Monthly Unique Visitors in 02/2013 (market-cap of today = 36 million, revenues in Q4/2012 = 20.9 million)
siteanalytics.compete/tripdavisor = 17,073,563 Monthly Unique Visitors in 02/2013 (market-cap of today = 7,560 million, revenues in Q4/2012 = 169.4 million)
Why investors should sell 10% of their Google shares and buy for the amount shares of Local Corp
Be Careful With Google
Background and Thesis
We believe that at these levels, Google (GOOG) is fairly priced and unless we see a marked improvement in Return On Invested Capital in the short term, the stock will struggle to move higher. This is not because earnings will not grow (they will), but the multiple you are paying right now is still a little stretched.
Source: Read more on Seeking Alpha
Local Corp development of Unique Visitors:
11/2012: 18,745,842 Monthly Unique Visitors
12/2012: 22,738,206 Monthly Unique Visitors
01/2013: 26,410,927 Monthly Unique Visitors
02/2013: 24,017,605 Monthly Unique Visitors
Decrease of 9.06% (February has only 28 days against 31 in January) against January and an increase of 38.64% year-over-year
Compare with the development of Yahoos’s Unique Visitors:
11/2012: 161,959,555 Monthly Unique Visitors
12/2012: 163,582,176 Monthly Unique Visitors
01/2013: 164,827,887 Monthly Unique Visitors
02/2013: 163,723,320 Monthly Unique Visitors
Decrease of 0.67% (February has only 28 days against 31 in January) against January and an increase of 12.10% year-over-year
Compare with the development of Linkedins Unique Visitors:
11/2012: 26,050,157 Monthly Unique Visitors
12/2012: 26,216,865 Monthly Unique Visitors
01/2013: 30,495,948 Monthly Unique Visitors
02/2013: 27,410,040 Monthly Unique Visitors
Decrease of 10,12% (February has only 28 days against 31 in January) against January and an increase of 7,71% year-over-year
Compare with the development of Foursquare Unique Visitors:
11/2012: 2,270,280 Monthly Unique Visitors
12/2012: 2,419,708 Monthly Unique Visitors
01/2013: 2,511,232 Monthly Unique Visitors
02/2013: 2,286,047 Monthly Unique Visitors
Decrease of 8,97% (February has only 28 days against 31 in January) against January and an increase of 56,23% year-over-year
Local Corp is extreme undervalued by a compare
The competition in the US-advertisement arena is getting pretty tough with Google (NASDAQ: GOOG) and Facebook (NASDAQ: FB) leading the way. Google currently holds the number-one position in the US advertisement industry with a market share of approximately 50%, followed by Facebook. Google has reported total US advertisement revenue of approximately $17 billion.
The display-ads market is a different story, and is being led by Facebook, which has total revenue of $2.6 billion. Google is quickly catching up with Facebook in the display segment, as well, and some analysts expect that Google's market share will exceed that of Facebook by the end of 2014.
Yahoo! is currently at the third position in the display segment and saw negative growth during the quarter. During the quarter, there was an 11% decline and 'ads sold' fell approximately 7% year-over-year.
One of the major reasons for this performance was the redesign of the Yahoo! homepage and email, which meant that multiple engagement trends were redefined. The search revenue saw a slightly better quarter, with y-o-y growth of 6.5% (10% of the closure of Korean operations are excluded). There was a significant increase of 16% in paid clicks, but it was somewhat offset by a 7% decline in CPC.
Facebook is currently my top pick in the Internet advertisement industry due to its mobile-monetization strength. Although Google has the Android OS on its side, the company has still not fully monetized its potential. Yahoo! will have to further improve its display segment growth if it wants to avoid revenue erosion by Facebook and Google.