TechWeb

Google's Growth Outpaces Rivals

Apr 24, 2006 (03:04 PM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=186700587


Search-based advertising continues to rise, but Google's growth is outpacing its rivals.

Americans submitted 6.4 billion keyword queries online in March, up 15% from the previous year, according to online metrics company comScore Networks. Between March 2005 and 2006, the total number of searches conducted per month in the U.S. on Google increased 36% to 2.7 billion. The total number of searches in that period conducted through Yahoo Search reached 1.6 billion, an 8% increase.

"With the number of sponsored clicks representing a significant driver of search engine revenue, it is not surprising to see the trends in comScore's sponsored click data align so closely with the Q1 revenue results released by Yahoo! and Google," said Peter Daboll, president and CEO of comScore Media Metrix, in a statement.

Last week Google reported revenues of $2.25 billion for Q1 2006, a 79% increase over Q1 2005, while Yahoo reported Q1 revenues of $1.57 billion, a 34% increase during the same period.

Internationally, the situation is similar. Google is growing its share of the market faster than the search market is growing. There were some 15.9 billion searches worldwide in February 2006, up from 12.1 billion searches during the same period in 2005, a change of 31%. That same month, there were 9.6 billion Google searches, a change of 59% from the 6 billion Google searches worldwide in February 2005.

In March 2006, 1.4 billion Google searches delivered a sponsored ad along with ranked search results, a 50% increase from the previous year. That same month, 942 million Yahoo Search queries delivered a sponsored ad, a 30% increase from the same period in 2005.

In terms of the overall percentage of query results returned with ads, however, Yahoo leads Google. Almost 60% of Yahoo searches return results with ads, compared to almost 50% of Google searches.

The challenge for Yahoo is to make its ads as relevant, which is to say clicked on, as the ones Google serves. Sponsored clicks from Yahoo Search results grew 30% in March between 2005 and 2006 to 180 million. Sponsored clicks from Google results grew 64% during that period to 322 million.

The flip side of those statistics can be seen in a report released earlier this year by market research firm Outsell which found that advertisers rated Google's keyword ads as more effective by a small margin than keyword ads on Yahoo.

Running a distant third in this race, Microsoft said last week that it had hired Steve Berkowitz, CEO of Ask.com, to revitalize its MSN online service. Long an also-ran in the search race, Ask.com has been gaining in popularity since it was acquired last year by Barry Diller's InterActiveCorp and its retro-mascot Jeeves was forced into retirement.

Google's success isn't without cost. The company's capital expenditures -- 34% of earnings and 42% of operating cash flow this quarter -- are soaring, according to the Susquehanna Financial Group, which estimates that Google hired 1110 new employees during the quarter, an increase in headcount of almost 20%.