Battle of the Search Giants

In yesterday's episode of "Cody & Task," I talked about the idea of staying long and/or building my Google (GOOG - commentary - Cramer's Take) position while shorting Yahoo! (YHOO - commentary - Cramer's Take). The big problem with shorting Yahoo! is that it's positioned to benefit greatly from the secular growth of advertising on the Internet. About 5% of all advertising is now done on the Net, but the medium should pick up another 45 percentage points over the next decade or so.

But Yahoo! just isn't run as well as Google is -- not even close. Yahoo!'s market share of search continues to fade slowly, in large part because the company has confused consumers about what it really is. Is Yahoo! a search engine? Is it a content producer? Is it an old-fashioned portal like Excite? Or is it some combination of all of the above? And how can I tell when it's serving as an objective conduit to information vs. trying to point me to something it created and has a vested interest in showing me?

Google is flirting with some of these same issues as it develops its video businesses and buys sites like YouTube. Try it yourself -- do a video search on Google for any celebrity and see how many Google-controlled YouTube video results show up vs. those from non-Google properties like MetaCafe, DailyMotion and RevolutioNetwork.com. I know that Google is losing its objectivity in organizing the world's content, but at least it's closer to staying trustworthy than Yahoo!.

That's the long-term thesis for why I think Google will have more upside over time than Yahoo!. Shorter term, there's also some compelling logic.

For one thing, I can't remember reading one single pessimistic or negative review of Yahoo!'s Panama ad platform. That, along with the rallying stock, raises expectations, so anything less than awesome results and outright earnings momentum from Panama's rollout will likely hit Yahoo!'s stock. The commentary from Yahoo!'s executives has also been full of optimistic rhetoric about how great the response to Panama has been. Shareholders had better hope there's some proof in that promised pudding.

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Cody Willard is the manager of CL Willard Capital Management, LLC. He is a regular guest on Fox News, CNBC and other networks, and he writes a monthly column for the Financial Times. He is also an adjunct professor at Seton Hall University and the author of TheCodyReport.net, a monthly stock market newsletter. Willard appreciates your feedback -- click here to send him an email.