Google loses search ad dollars to Yahoo, says study


New York : Internet search engine Google lost revenue from search ads to its rival Yahoo! in the first quarter of 2008 fiscal, according to a study by SearchIgnite, a search advertising technology firm.

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The report shows that spending by search advertisers on Yahoo! grew a robust 57 percent while spending on Google grew only at about half that rate. That meant Google’s total share of search ad dollars declined slightly to 70.4 percent, while Yahoo!’s rose to 24.2 percent. Microsoft’s declined slightly to 5.4 percent, says a report in the New York Times Tuesday.

“It was unusual and unexpected,” said Roger Barnette, president of SearchIgnite.

The study, released Tuesday, is likely to be closely read as it comes just days before both Google and Yahoo are scheduled to report financial results for the first three months of the year. Both company’s finances will be scrutinized in detail, for different reasons.

Investors will comb through Google’s financial report Thursday for signs that concerns over the company’s slowing growth are warranted.

Fears that the economic slowdown is going to take a bite out of Google’s business reached fever pitch in late February, when comScore reported that the number of clicks on Google’s ads, also known as “paid clicks”, were flat in January compared to a year earlier.

Fears eased somewhat, after other reports suggested that the comScore numbers might not be representative and the slowdown at Google may have been partially self-inflicted. But many analysts have cut their estimates and are watching anxiously for Google’s earnings report.

The SearchIgnite study show that year-over-year growth in dollars spent on Google declined sharply between January and February, and again between February and March. “It looks like it was a strong first quarter overall,” Barnette said. “What is of concern is that intra-quarter trend is further slowing.”

For its part, Yahoo!’s earnings report will be closely watched to see whether Microsoft’s Steve Ballmer or Yahoo’s own Jerry Yang is right. Ballmer has argued that Microsoft’s takeover offer is even more generous now than on Jan 31, when it was first made, in part because Yahoo!’s business has deteriorated further. Yang has said that’s not so, and insisted that Microsoft’s offer undervalues Yahoo!.

In mid-March, Yang told investors that Yahoo! would meet its first quarter projections, which call for net revenue to grow at between 8 percent and 17 percent.

“If these numbers are an accurate reflection of the market, it could lead Yahoo! to surpass expectations,” Barnette said.

But Barnette noted that Yahoo! had a particularly weak first quarter in 2007, as it launched its new search advertising system, which could make the 2008 comparison unusually flattering. Yahoo! is reporting first quarter results April 22.