The Fortune profile of Ray Ozzie mentioned on Tuesday reported veritable drooling in the Microsoft executive suite over the potential rewards from Internet advertising. But how are things going today? Maya Roney at Forbes reports the current state of play in Google Maintains Lead In Search, Ad Growth:
Global advertising could grow 35% in the first quarter of 2006, with search advertising growth continuing to outpace branded and Google continuing to lead in market share gains, according to a recent Merrill Lynch report.
The analysts expect Google to increase its advertising share in the first quarter to 30%, up from 28% in the fourth quarter of 2005. Yahoo!, Time Warner AOL and Microsoft MSN will likely lose advertising share as the first quarter is not a strong branded quarter, they said.
The distinction here is between direct sales of display ads on the companies’ own “branded” content sites (e.g. the recently announced Microsoft deal) versus ads appearing with the results of the respective search engines. Google isn’t a strong branded content provider although they are trying, and conversely, the others have strong content offerings, but are weak in search (AOL, of course, uses Google). Related to search advertising is Google’s lead in contextual ads placed on 3rd party Web sites since Yahoo and Microsoft aren’t even out of the gate.
As an example of the battle for branded advertising, see Making Money From Online Maps which describes how Yahoo and Google are duking it out for a distant second place in online mapping with Time Warner AOL’s Mapquest still the reigning champ.
Finally, while Google may be the only one gaining share, a rising tide lifts all boats as Yahoo demonstrated in its earnings announcement yesterday:
Yahoo, the chief rival to Google Inc. in the market for Internet search advertising, saw revenue in its branded and search advertising businesses rise 35% to $1.38 billion, as more consumers and businesses pay to have their ads displayed next to search results. Anthony Noto, an analyst at Goldman Sachs, estimates that search sales grew 9% from the previous quarter.
Sue Decker, Yahoo Chief Financial Officer, would not confirm whether that growth rate was accurate, in an interview with MarketWatch.