• New York Times, Wednesday, October 11, 2006 11:45 AM

Every time Google makes a big move, the next day there's a story asking, "what's wrong with Yahoo?" Somehow, Google always manages to steal Yahoo's thunder. A few weeks ago, all the talk was about how a Facebook acquisition could lead Yahoo into new territory, making it a leader in social media, the hottest sector of the Web today. No deal happened, and there's been no word as to why.

The New York Times reports that Yahoo also made a bid for YouTube at around the same time, getting as far as negotiating a price and terms before Google swooped in and stole the deal. Just as it's done with the AOL and News Corp. search deals completed in the last year. Is Yahoo unwanted, or just slow to complete these deals? The newspaper points out that the Web portal should have a pretty strong hand: 400 million monthly uniques, big-time ad sales, robust email, messaging and music platforms.

But Yahoo has lost a step or two in recent years, says David Cohen, svp of media buyer Universal McCann. His firm has allocated spending away from sites like Yahoo in favor of social networks like MySpace, as well as sites developed by media companies such as Viacom. "There are more players in town, and the others are closing the gap relative to the things Yahoo is good at," Cohen added. In other words, the content just isn't good enough, and users are going elsewhere.

The result? Yahoo's shares have dropped 38 percent, and full-year ad sales have been revised down twice. To make matters worse, Project Panama, Yahoo's new search ad system, is more than a year late--sucking up the company's engineering resources to the point where it hasn't been able to develop new ad products. As things stand, Google has $11 billion in cash and is worth $131 billion. Yahoo has $4 billion in cash and is worth $34 billion.

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