October 16, 2006

Yahoo is rapidly losing real estate ad revenue to search rival Google.

As a search portal, Yahoo makes most of its advertising revenue on its own content. If you compare this to search rival Google, which only sells ads on other people's content, you will notice very different results.

In terms of ad-space-inventory, Yahoo will probably continue to lose market share as long as its content is growing slower than the Internet as a medium.

Google sells ads when you search for, say, "Miami Florida Real Estate". The paid ads are around five bucks a click from one of the big real estate brokers. Many of the results lead to content sites, like Trulia and Zillow, both of whom make their own money reselling Google ads.

Yahoo, of course, has the exact same paid search opportunity. But that business only grows if more people are searching with Yahoo.

Meanwhile, and despite the housing bubble burst, online real estate ad spending is still rapidly increasing.

Internet real estate advertising jumped to a $2 billion level in 2006 and will surpass the $3 billion mark in four years from now, and beating newspapers in terms of advertising market share.

There is room for even more growth. Sixty-one percent of agents do not advertise on the Internet. And 87 percent of agents are not buying keywords on Google or Yahoo.

Borrell is actually projecting overall online and offline real estate marketing spending to decrease between now and 2010 as the bubble deflates, so the online percentage gain is even greater.

Beyond paid search ads, the Trulias, Homethinkings, BuyerHunts and the Craigslists of this world are providing new channels to reach home buying consumers.

Agent websites, blogging, market research and other online tools add to the total spend. These channels, because of their efficiency gains, actually grow the real estate marketing pie, rather than simply transfer from offline to online spend.

In spite of declining real estate activity, online real estate spending will continue to go through the roof.

In all cases, interestingly, Google increases revenue leverage, where Yahoo loses a greater percentage of its market share. Yahoo may be a great company and may continue to throw off huge amounts of cash. But the company's current problems shouldn't be blamed on the housing bubble any more than say, bad weather.

Source: Yahoo Finance