Report: Google's online ad market share slips in Q4

Total U.S. online advertising in the U.S. grew nearly 28% in the same period

Google Inc. lost online advertising market share in the U.S. in the fourth quarter of 2007 for the first time in two years, according to a forthcoming report by market research firm IDC.

Google, the leader in the U.S. Internet ad market, slipped 0.5 percentage points to 23.7% in the last quarter in comparison with the third quarter due to a slower growth rate in advertising sales, IDC said.

In addition, Google's estimated net U.S. online ad sales grew by a little more than 40% in the fourth quarter of 2007 in comparison with the same quarter a year ago, IDC said. However, Google's year-over-year growth rate in the previous quarter had been 50%, the firm said. IDC is a subsidiary of IDG Corp., the parent company of Computerworld.

Total U.S. Internet ad spending in the fourth quarter grew nearly 28% to $7.3 billion, compared with the same quarter in 2006. Online ad revenue grew 27% year over year to $25.5 billion for all of 2007, according to IDC.

"If a merger between Microsoft's new media business and Yahoo would come to pass, the combined entity would have a net U.S. advertising market share of about 17% based on our fourth-quarter 2007 data," said Karsten Weide, program director of IDC's Digital Marketplace: Media and Entertainment service and author of the upcoming report. "It would not quite bring Microsoft-Yahoo to where Google is in online advertising in the U.S., but it would give them a much better fighting chance than if they went it alone."

Meanwhile, a combination of the online ad businesses of Microsoft and Yahoo would give the merged company a better chance to catch up to Google in four or five years, according to a separate IDC report released this month that looked at how a Microsoft-Yahoo combination would stack up against Google in the U.S. online advertising market.

According to IDC, merging the existing businesses in search, display and rich-media advertising would bring Microsoft-Yahoo's annual estimated gross U.S. online ad marketing share to 21.4% compared with Google's 33.4% annual market share as of the fourth quarter of 2007.

In addition, combining the existing online products, advertising platforms, and engineering resources of Microsoft and Yahoo would extend the combined companies' reach, improve products and services for both consumers and advertisers and increase ad revenue, according to the report also authored by Weide.

A merged Microsoft-Yahoo would also be very competitive and might be stronger than Google in markets such as mobile advertising, social networking and behavioral targeting, in which ads are targeted more precisely at consumers' needs by monitoring their online and consumption behavior, Weide said in the report. However, even a combined company could not compete with Google in video advertising, he said.

Copyright © 2008 IDG Communications, Inc.

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