Differences between Yahoo and GoogleDecember 21, 2004 Yahoo and Google have always strived for different goals that may become more apparent and even more distinctive as they move into 2005. Google, owner of the leading online search engine, is devoted to a single-minded mission: transforming the way the world finds and stores information, even if that means sending people somewhere else. Yahoo, owner of the world's most popular Web site, is taking a more multidimensional approach as it strives to be all things for all people — a one-stop destination for recreation, work and research. "The differing visions of the companies' founders and management teams will likely lead them down very different paths," UBS analyst Benjamin Schachter predicts in a recent research report. The philosophical contrasts already influence how the rapidly growing companies spend the money that's cascading into their bank accounts. Mountain View-based Google devotes significantly more of its budget to research and development, with more than $300 million — about 30 percent of its operating cash flow — earmarked for capital expenditures this past year. Meanwhile, Sunnyvale-based Yahoo is expected to spend $215 million to $235 million on capital expenditures, or about 20 percent of its operating cash flow. Schachter believes the capital expenditure gap will widen in 2005 when he projects Google will spend $450 million while Yahoo allots about $250 million. If those estimates pan out, Google's capital expenditures, broken down as a percentage of operating cash flow, will be similar to such technology leaders as Microsoft Corp. and Intel Corp. Google also takes a more laissez faire approach toward innovation, embracing new ideas and products long before the company's management figures out how everything fits into the overall business plan. "We are compiling this collection of very cool technologies and taking our sweet time figuring out what to do with them," Google chief financial officer George Reyes said during an investment conference in early December. The strategy has produced an exotic casserole that includes e-mail, shopping and news services, three-dimensional maps, digital photography, tools for creating Web logs, or blogs, and software for searching the information stored on computer hard drives. Yahoo takes a more practical approach to technology, first identifying what people want and then building or buying a product designed to give visitors one less reason to leave its Web site — already the world's most popular online destination. Yahoo wants to be "essential to people's personal and professional lives," spokeswoman Mary Osako said. The emphasis has pushed Yahoo into territory that Google hasn't tread upon. The list of Yahoo services unavailable at Google include instant messaging, music, gaming, fantasy sports leagues, job placement, matchmaking and broadband service. While it offers free versions of all its services, Yahoo constantly looks for ways to charge its visitors for extra bells and whistles. Google, in contrast, gives just about everything away except a recently acquired 3-D mapping product called Keyhole, which charges $29.95 for its basic software. As it continues to sprout more tentacles, Yahoo is morphing into a media company and its 7,000 employees vastly outnumber Google's 2,700 workers. Yahoo already promotes heavily to spread its message, spending $551 million, or 22 percent of its revenue, on sales and marketing through the first nine months of 2004. Google so far only has bought ads to attract job applicants. Through the first nine months of 2004, Google spent $170 million, or 8 percent of its revenue, on sales and marketing. With so many more things to do on its site, Yahoo's fortunes are tied more closely with the switch from slower dial-up Internet connections to higher speed broadband services. Web surfers with broadband already spend 22 percent more time on Yahoo's site than visitors using dial-up, Schachter said. Broadband users spend 3 percent more time on Google's bare-bones site. Like Yahoo, Google shares one key characteristic with media companies — virtually all of its sales come from advertising. But Google prizes innovation over profits. "In some businesses, the salespeople tell the engineers what to do, but at Google the engineering team is really our driving force" said Marissa Mayer, the company's director of consumer Web products. Google is trying to foster a research-driven culture akin to General Electric Co., 3M Co. and DuPont Co., Mayer said. Yahoo also has its geeky side, perhaps best embodied by the company's co-founders, former Stanford University computer graduate students Jerry Yang and David Filo. After starting Yahoo in 1995, Yang and Filo later encouraged two other Stanford computer graduate students, Larry Page and Sergey Brin, to continue developing the search engine that became Google. Although the two companies are no longer friendly partners, Yahoo still holds a substantial stake in Google. Yahoo generated a $105 million profit by selling 2.3 million Google shares during the summer and still owns another 5.9 million shares — worth about $1 billion as of mid-December. Yang and Filo have remained at Yahoo, but the company's key decisions are made by a management team headed by former Hollywood movie mogul Terry Semel, who has also brought in several lieutenant with media backgrounds.
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 That list includes the recent hiring of former ABC television executive Lloyd Braun to oversee Yahoo's entertainment division — a move that may foreshadow the company's push to generate more of its own original content on its site. Page and Brin have structured Google so they retain final say over all decisions. They run the company in collaboration with the company's CEO Eric Schmidt, who holds a doctorate in computer science — a common thread at Google. "We want Google to be the very place to work for the very best computer scientists in the world," Reyes said. "Google is truly a learning organization." Source: Yahoo News 
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