A few years ago, Yahoo had emerged from the dot com bust with a little confusion about what it was. It has always been a bit complicated to explain what Yahoo is about. Google (GOOG) clearly has stated its objective to “Organize the world’s information” and generally has been consistent with that message. Yahoo on the other hand has many different goals, mostly related to being a web directory but also offering various services related to dating, finance, etc. Many of the users do not even know that the service they are using is powered by Yahoo.

However, one thing that was clear from a few years ago was that it was not in the business of producing content, only delivering them. And that made sense because one of the problems of Yahoo is its lack of focus. But on Monday, they announced the launch of a series of niche web shows that they say will not be competing with tv shows. Perhaps true, but it is once again difficult to see what Yahoo’s goal is with this new project. “We may have come at it from the wrong way in the previous era,” Sibyl Goldman, the head of entertainment for Yahoo, told the New York Times. “The one-way model – ‘We think this is great, we hope you come watch it’ – may have been more of a TV mindset,” she said.

Could it be profitable? Yes of course, there is no doubt that it could become so. But I somehow doubt that Yahoo currently has the creative team to make this happen which will force the company to spend much needed time and energy on a new project that could be spent elsewhere. Improving the finance network as well as the search and advertising capabilities seem to be higher priorities in my opinion. They are banking on sponsorship deals with companies such as Verizon and State Farm but that again seems like a short term move.

And if Yahoo really thinks it should have an important online presence online, it would have been much better to spend energy on building it in earlier stages. Now that competitors from Youtube to Hulu or TV.com have gained such an important market share, it will be very expensive to catch up from the slow start Yahoo had in this sector.

They claim to be getting 400,000 views on short clips, which is still very far behind Youtube’s daily hits in the tens and hundreds of millions. Just seems like Yahoo is either very late to the game or should have never even entered this one….

Today was an interesting day in the markets with Ebay rising by 4,8% as they announced that the Paypal division was expected to double its revenues by 2011 creating by itself an important amount of growth. And as of writing this post, Ebay is up an additional 3,7% which if it carries through could mean the successful end of the February 25th trade,  as the trade is currently up 24%. But given that part of it is after market, I will wait tomorrow’s action to decide if the close should be terminated.

On another note, some very interesting action in the internet travel sector as Expedia announced a major promotion that sent Priceline and Orbitz sinking. I will have to re-evaluate the situation but it certainly looks like a trading opportunity. I have major doubts that Priceline’s 6,6% decline is warranted but it is already rebounding after hours so for now I will observe and perhaps Priceline will be part of my next trade, it has been a favourite of mine in recent months.

All for now!

In November 2006, when Google announced it was purchasing Youtube for $1.65 billions, it raised a lot of questions about how they intended to profit from this new purchase and what plans they had in mind. They cleared up from the start that they would not be changing much from the perspective of the user clearing up rumors about the possibility of adding ads before the start of other videos and other such methods often seen as “restrictive” from the viewer’s perspective. Truth be told, few raised doubts about Google’s ability to generate a cash cow from the leader in online video. As Google had done with many other of its products, we expected to see Google come up with many innovative ideas to come up with advertising dollars.

But while the game is far from over, Google has certainly not been able to live up to its shareholders expectations for Youtube as it has been defined as being about breakeven, far from its target and the from the usual return on capital that Google is used to. The good news of course is that Youtube has continued to grow in terms of users, of content and despite many issues with Copyrights, it seems to be getting better about dealing with all of these issues as time goes by which is obviously great news.

In terms of competition, there is little to none. The main competition currently is from Hulu, the Super-Bowl promoted video website that has been gaining a lot of ground in recent months although it is in a very different competitive arena than Youtube. While Youtube is getting content from every possible arena and all kinds of users, Hulu is focused on professional content mostly generated by US TV networks such as FOX and NBC. The problem for Youtube is that since Hulu’s content is better controled (obviously), advertisers feel a lot safer spending money and knowing that their brands and messages will be next to high quality content while that is much more difficult to promise on Youtube.

But I still think Youtube has enormous potential and am surprised to not see more in terms of innovation coming from the Google division. Here is one idea that i think could in a matter of 3-4 years become a major revenue generator. What is the biggest online event in the world? The SuperBowl of course!! Why? Well there are many reasons and perhaps the most important is the number of viewers captured at once. But perhaps even more important is the creation of an interest in the ads. Some studies show that as much as half of the viewers are more interested in seeing the ads than the game itself. Gold you say? Obviously. The ads are not only a 30 second span to gain attention but will often be talked about and watched for days and weeks. That is worth so much for advertisers.

So back to Youtube, I think a similar concept could be applied to Youtube, in terms of generating major events that would not cost much.

Here is a breakdown:

-Youtube sets up an annual contest of 30-60 second clips with entries of 100-200 videos subject to editorial picks to start with. Then, over a month, perhaps in October/November (to capture the viewers attention before the all important Holiday season shopping), you have the competition ina similar format to that of a tennis draw or an NCAA basketball event. Every day, 8 ads could compete with the highest rated ones moving on to the next round.

-Can you imagine the amount of buzz that could be generated over one month as fans talk and discuss the better ads and vote for their favourite ones. Every day, you have 8 ads that would be viewed by tens of millions around the world.

And then when year #2 comes around, you apply the same concept but charge for entry. Pepsi, Coca Cola, Budweiser, etc would certainly be more than willing to pay 10-20K to start for such a spot/opportunity and as demand rises, so would the entry price. If the Super Bowl can generate a few millions per ad, just imagine how much this could generate for YouTube???

Any thoughts?