The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.



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is facing continuous pressure from


(GOOG) - Get Report



in the online advertisement market. The revenue generated by Yahoo! for every 1,000 pages (RPM) viewed on its owned and operated sites has seen a declining trend since 2007, attributable to a weak macroeconomic environment as well as mounting competitive threats.

Yahoo! is making some right moves to improve its monetization rates. While it has shut down under-performing sites, it is focusing on growth areas like video, mobile and social networking. We believe that higher expected users on Yahoo! sites and growth in online ad market will lift Yahoo!'s display ad revenues in the coming years.

While we expect Yahoo!'s revenue per page view (RPM) from display ads will increase to $1.22 by the end of our forecast period, Trefis members predict the revenue level reaching $1.35 implying slight upside to our current estimates. We currently have a Trefis price estimate of $17.88 for Yahoo!'s stock, about 7% ahead of the current market price of $16.74.

Yahoo! Invests in New Growth Areas

Yahoo!'s revenues from the U.S. market declined has been declining (from $4.85 billion in 2009 to $4.43 billion in 2010) while of its competitors like Google and Facebook are rising. Facebook, in particular, has grown phenomenally. Its share of the U.S. online advertising market has nearly doubled from 7.3% in 2009 to 13.6% in 2010.

But Yahoo! isn't laid-back. In the past few years, it has closed down under-performing and non-core sites like social bookmarking service Delicious, search engine AltaVista, online news aggregator Buzz, and social network MyBlogLog. It is also investing in growth areas like social media and videos which should draw more visitors to its sites.

Yahoo! is improving the amount and quality of its video content across various media verticals like sports, news, finance and entertainment. Videos carry higher engagement levels and hence provide

better ad monetization opportunities

for Yahoo! It is also leveraging Facebook's large user base to attract more traffic to its own sites by installing tools such as "Like" and "Share." These tools will enable Facebook users to share Yahoo! content with their friends, and create a viral effect through which Yahoo! can attract more traffic.

Growth in Online Ad Market

We expect online advertising will continue to take away share from traditional media like TV, newspapers, and radio. With that, advertisers will try to consolidate their advertising around big companies like Google and Yahoo!, which provide them with unmatched scale and higher visibility. According to eMarketer, the online display advertising market could record consistent double-digit growth over the next few years. This suggests strong opportunity for Yahoo! to make a comeback with an improvement in its user engagement level and more number of users to its sites.


complete analysis for Yahoo!'s stock is here.

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