Yahoo! Inc. (YHOO): How Should You Play It?

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Companies choosing to pay for online advertisements have multiple options. Google Inc (NASDAQ:GOOG) has the strongest search size, but has seen a decline in sales revenue in the last year as well.

Google Adwords is one of the most popular online advertising channels, representing two-thirds of the total market. However, it hasn’t been able to translate this success to mobile advertising. And Facebook toppled Google Inc (NASDAQ:GOOG) this year for mobile ads.

Mobile advertising represented 11% of total digital-advertising spending as of data in 2012. This year it is likely to reach 16% or more of all digital advertising. It is imperative that Google increase its efforts in mobile applications. As businesses elect mobile advertising over standard digital advertising, it could take away from Google Inc (NASDAQ:GOOG)’s total revenue.

Both Google and Facebook Inc (NASDAQ:FB) will have to fight Twitter and Pandora Media Inc (NYSE:P) for mobile advertising, as well. Both of these companies offer specific advertising options for companies.

Final thoughts

There are difficulties in store for advertising revenue at Yahoo! Inc. (NASDAQ:YHOO). There is stiff competition in the online advertising world, and Yahoo! hasn’t been able to capture more market share.  That said, investors should see keep looking at Yahoo! because the stock is reasonably priced.  For instance, its price-to-earnings is only 6.8. Google Inc (NASDAQ:GOOG) and Facebook, on the other hand, have price- to-earnings ratios of 24.4 and 1,714, respectively.

The road ahead will be challenging for Yahoo! Inc. (NASDAQ:YHOO). The safer bet for online advertising is Google and Facebook Inc (NASDAQ:FB), though Yahoo! is priced at a very conservative level. If the CEO Marissa Mayer can continue to steer Yahoo! to higher profits while growing all of its divisions, investors may want to consider this stock in the future. But right now, the company does not fit the bill for conservative investors.

The article What Should You Do With This Online Giant? originally appeared on Fool.com.

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