• Information Week, Tuesday, January 13, 2009 11:46 AM

A major source of frustration for financial analysts covering Google is the fact that the search giant issues no forward-looking guidance. As a result, analysts' expectations for the stock can vary widely. The gigantic question mark in the company's recent fourth quarter performance is whether demand for search advertising increased, and by how much.

According to data from AdGooroo, a Chicago-based search research firm, Google led its competitors during the fourth quarter with 58% growth in the average number of ads it showed per keyword on the first search results page (4.01 keywords in Q4 vs. 2.54 in Q3). In December 2007, Google actually ran 4.84 ads per keyword, but since then, the company has made a concerted effort to improve the quality of the ads it shows. The result has been far fewer first page ads per keyword in 2008, though these are ostensibly of a higher quality. Looks like Google may have decided to return to showing more ads per keyword in light of the recession.

In any event, the AdGooroo report states that "Q4 will prove to be the strongest quarter on record for Google and Microsoft Live Search." Microsoft showed 42.3% more ads per keyword on the first page of its results than in the third quarter, or 3.37 ads per keyword. Yahoo came in third with 3.01, representing growth of only 8.8%.

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