Google, Yahoo Search Ads Earn Their Spotlight

The state of online ad spending takes center stage this week as Google and Yahoo report their latest earnings.

The reason for the focus on average key word prices, prices per click and other mysteries of the online ad market? The two Internet behemoths generate nearly all their revenue by selling ads.

In that light, there’s been some good and bad news. Fathom Online researchers believe there’s been a 3 percent decline between January and March in a key metric used to determine online advertising rates.

The start to 2006 is a little more ominous for Google and Yahoo when considering that the same metric dropped 12 percent since the end of 2004, according to figures from Fathom as interpreted by Citigroup analyst Mark Mahaney.

Other online ad watchers think the slide is as high as 17 percent.

But there’s another key fact to consider in the online ad puzzle; that is just how much online ad spending is going on. Merrill Lynch researchers believe Internet search advertising is a major reason why there’s been a 35 percent increase in the amount of global advertising spending since January.

ComScore Network recently reported that Americans conducted 6.4 billion searches in March. That’s 10 percent more than in February.

This is a murky, bad news/good news backdrop for financial reportage from Yahoo (April 18) and Google (April 20).

Google is coming off its first-ever quarter in which its results didn’t meet analyst expectations. But Google’s seen its share of the Internet search market increase by a total of 6.3 percent, while rival search engines from Yahoo and Microsoft each lost share, according to new research from ComScore.

Nearly 43 percent of all Internet searching is done through Google, 28 percent at Yahoo and 13.2 percent at Microsoft’s MSN search engine, according to ComScore.