Google gets edge on rival Yahoo! in Internet ads battle
Google’s shares gained 7.3% to 457.22 dollars (362 euros) by 1630 GMT after analysts on Friday morning urged people to buy stocks in the Internet giant following its seven-percent gain on Thursday, when it closed at 456.34 dollars.
Some enthusiastic analysts predicted the shares could even surge to 600 dollars.
Google announced on Thursday that it had almost doubled its net profits in the third quarter to 733 million dollars (581 million euros) and increased its revenue by 70% to 2.6 billion dollars (2.06 billion euros), of which 99% was online advertising.
Google’s increasing share of the market contrasts starkly with the fate of advertising in the traditional media as several US newspaper groups, including the New York Times, announced on Thursday a fall in revenue and the NBC television group decided to prioritise Internet over television broadcasts.
Yahoo!, however, announced a 38% fall in profits in the same quarter, at 158.5 million dollars (125.7 million euros), and a rise of only 19% in revenue to 1.58 billion dollars (1.25 billion euros).
A year ago, Google and Yahoo! were roughly neck and neck, each claiming 18% of US advertising revenues. Today Google commands 23% of these revenues compared to 19% for Yahoo!, and is expected to end the year on 25 percent, according to the specialised institute eMarketer.
The stakes are high because US advertising revenues are expected to reach 16.7 billion dollars (13.2 billion euros) in 2006 and 29.4 billion dollars (23.3 billion euros) in 2010.
Google’s search engine, by far the world leader, is also making major gains. The group notably won a contract this summer to provide advertising exclusively to the popular Internet exchange site MySpace and signed a similar deal with the online auction giant eBay’s international sites. Google has also just pulled off the biggest acquisition of its eight year history with the purchase of the YouTube video swap website for 1.65 billion dollars (1.31 billion euros), betting on the advertising opportunities in the expansion of online video services.
The group is diversifying its products, with specialised search tools for finance, newspaper archives, online word processing and further developments to its email service, including advertising linked to the text in emails.
Its model remains one of providing free services to web surfers funded by advertising revenues.
Google seduced hundreds of millions of partner sites and advertisers with its Adsense tool which guarantees the automatic appearance of advertising sites linked to the content of searches – a system which Yahoo! is currently working to implement.
For its search engine alone, Google attracts 45% of American demand (up one point on August) with 2.8 billion searches in September compared to 28% for Yahoo! (down one point) and 12% for Microsoft’s MSN search engine, Mediatrix said.
In 2007 Google was expected to control 30% of the online advertising market and Yahoo! 18.4%, ahead of Microsoft and AOL (Time Warner).
Yahoo! has not given up the fight, however. The group has just bought two small companies: rich media advertising provider AdInterax and 20% of Right Media which manages an auction system to sell advertising online. The group is also about to launch Panama, its new advertising management platform.
Specialist observers on Friday hailed Google’s "impressive" results meanwhile, one calling Google "still the best buy in the internet sector". Brokers Merrill Lynch said Google’s pulling ahead was "likely driven by technology enhancements and relative traffic gains".
"Google’s technology investments provide differentiated consumer experience, monetization and partner affinity," the brokers said.
"Technology advancements will extend Google’s advertising share lead at the expense of its peers."
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