Yahoo! Inc. (YHOO): Expanding The Ad Network

Losing Ground

The sleeper in this deal could be Tumblr’s mobile business. Google is the advertising giant in the online space, but it doesn’t have the same scale in mobile advertising. That’s part of the reason why the company’s margins have been contracting of late. It just doesn’t earn as much in the mobile world as it does online.

This also means that Yahoo! Inc. (NASDAQ:YHOO) can still build a mobile ad business on a competitive basis. Of course Tumblr’s large community will also help Yahoo’s compete online, but it won’t unseat Google Inc (NASDAQ:GOOG) any time soon. That’s OK, though, because there’s plenty to go around in Google’s shadows.

Another Ad Network

For example, IAC/InterActiveCorp (NASDAQ:IACI) is another company that generates money by advertising across its network of sites and services. The company owns second tier search networks like Ask, dating sites like Match.com, and a varied collection of entertainment and information websites.

After a series of corporate actions, IAC/InterActiveCorp (NASDAQ:IACI) has grown its top line in each of the last three years. It also started to pay a dividend in 2011, and has already started increasing it. IAC/InterActiveCorp (NASDAQ:IACI) is well off its all-time highs, but is hardly a cheap investment. That said, for growth and income investors, it’s a nice way to get Internet exposure. It yields around 2%.

Taking on Goliath

Google Inc (NASDAQ:GOOG)’s shares are priced for perfection even though the company’s underlying fundamentals are starting to deteriorate. That could lead to a big fall for the search giant’s shares when investors start to catch on. Google investors might want to consider cashing in some chips.

Meanwhile, investors are just starting to rethink their view of Yahoo! The shares have begun to move higher as they gain confidence in Mayer’s turnaround efforts. IAC/InterActiveCorp (NASDAQ:IACI) is clear evidence that an ad driven business can be grown even with Google around. And, the mobile market is still an open field. If Yahoo! Inc. (NASDAQ:YHOO) can get a better hold there, investors are likely to be well rewarded. The Tumblr deal is a great start.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google Inc (NASDAQ:GOOG).

The article Expanding The Ad Network originally appeared on Fool.com.

Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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