Add to del.icio.us     Digg this

Feb. 14, 2008

Since the news Monday, Yahoo's rejection of Microsoft's buyout offer could mean that a potential acquisition, either by Microsoft or anybody else could take a lot longer than what some expected. It might even take a much different direction as well. The next few weeks will in fact be revealing as to what the outcome of all of this will be.

Whatever happens, there are some that still think Yahoo remains rather strong in its position in the search industry.

By any measuring standard, Google still largely dominates search and by a very wide margin. According to Efficient Frontier, in the U.S., the company's portion of search advertising spending increased among the top three search engines from the fourth quarter of 2006 to the fourth quarter of 2007.

To be fair, Google's main competitors haven't been sitting still either, not by a long shot.

Additionally, the launch of Yahoo's Panama search platform greatly increased the company's ROI by almost 40 percent during the period studied. Efficient Frontier also added that MSN leads the major search engines in average click-through rate and ROI.

The survey company credited this to MSN's smaller number of advertisers, making for less competition and thus stronger performance for its advertisers. On average, every percentage point of market share matters a lot in search advertising.

Overall, eMarketer projects that U.S. search ad spending growth will drop a bit for the next four years when compared with today's data, and that search will still remain the largest portion of the U.S. Internet ad spending market.

It's important to note that Internet advertisers have a weighted interest in the outcome of any search industry consolidation. Although a good majority of those advertisers are fairly happy with Google, others worry about its overall market dominance, and its hefty footprint when compared to even Yahoo and MSN combined.

On average, paid search reached about a 40 percent share of total U.S. Internet ad spending four years ago. Since then, Internet advertisers and eTailers have in the past, and will continue to place about the same percentage into search. Efficient Frontier's study is very clear on that.

The well-publicized desire for a strong Google alternative will help keep its rivals very busy, even if they end up consuming each other in the process. Some say industry consolidation is a good thing.

Only time will tell if the same will prove to be true in the search segment.

Add to del.icio.us     Digg this

    This article was featured on Business 5.0.

Source: eMarketer.