• by Laurie Petersen , May 9, 2007

It's a wacky time to be covering the Internet, according to Jordan Rohan, managing director and Internet analyst for RBC Capital Markets, who said only 80% of what's happening in the market makes sense to him.

Rohan, who has covered the industry since 1999, laid out his points of view on specific industry segments--and search engines in particular--as yesterday's keynote presenter at the Search Insider Summit in Bonita Springs, FL.

One resonating statistic Rohan related is that a 45% gap still exists in monetization between post-Panama Yahoo and Google.

An RBC/Search Ignite analysis of more than 500 advertisers found that for those that are not big brands, Google "trounces" Yahoo on performance. But for the largest advertisers, Rohan said, Yahoo effectively competes against Google.

Brand keywords are the best kind to buy, Rohan said, with research showing that 53% of Yahoo clicks come from 8% of keywords purchased. Brand keywords, however, typically represent only 15% of a search advertiser's budget.

The price may have been wildly inflated, but Yahoo's acquisition of Right Media and its ad serving network was a smart move, Rohan said--because the company can't grow its premium page views as rapidly as can the broader Internet.

As for a possible Yahoo/Microsoft deal, Rohan doesn't see it happening. For Yahoo, he said, the timing makes no sense, since Panama was just released. Nor would Yahoo's consumer-facing culture mesh with the more technology-oriented Microsoft, he added.

A marriage that does make sense to Rohan would unite Yahoo and eBay, turning the 5 million or so eBay powersellers into Yahoo advertisers. Yahoo announced a deal with eBay-owned PayPal last month that gives a premium display on Yahoo to PayPal merchants.

Rohan noted that Google has more employees than Yahoo and eBay, and that it added 1,400 employees in the last quarter alone. Given the massive exodus of those hitting the company's four-year total vesting mark, this means that Google actually hired more than 3,000 new workers to reach the 1,400 number. Those workers who remain because they want to are in effect "economic volunteers" because stock wealth renders their paychecks meaningless.

Rohan sees logic in the GoogleClick combination, which he said could revolutionize the display advertising business by figuring out every piece of Internet inventory and its worth at any moment in time. The combination also gives Google more international strength--especially in Western Europe, Rohan said--but he forecast that the Performics affiliate marketing division will probably be sold off once the deal closes.

Ad serving is also a thriving business, with Rohan pointing to the latest strong quarter for aQuantive, which added Accipiter to its Atlas ad-serving network.

Rohan also predicted that 24/7 Real Media will have a deal announcement of its own to make this week, although he can't understand why WPP or Microsoft would be interested in it. The company's quarterly earnings are due out Thursday.

Following up on a research note he issued April 26, Rohan forecast a "big shakeout" in the lead generation industry and some FTC action within the next 30 days over misuse of the word "free" in online campaigns.