• by Wendy Davis  @wendyndavis, July 21, 2005

Yahoo! probably has lost ground to Google in search marketing, according to a Merrill Lynch report released Wednesday.

Merrill Lynch estimated that Yahoo!'s search revenues grew 48 percent for the year, but just 3 percent quarter-over-quarter. "We fear that when Google reports results on Thursday that Yahoo!'s search share loss will be evident," wrote Lauren Rich Fine, a Merrill Lynch research analyst, in the report. Google is expected to report second-quarter earnings today after the stock markets close.

Yahoo! Tuesday reported that second-quarter revenue grew by 44 percent to $875 million (excluding traffic acquisition costs), and profits climbed to 13 cents per share (excluding sales of Google stock) from 8 cents a share last year. But the company disappointed Wall Street; analysts had predicted quarterly revenue of $881 million.

But the report also characterized Yahoo! as "the clear leader in branded." Merrill Lynch estimated that Yahoo!'s revenue from branded ads grew 43 percent for the year and 10 percent for the quarter.

Another Merrill Lynch analyst, Justin Post, issued a report noting that leading traditional marketers are increasing their use of search. "[W]e expect increasing online commerce competition from WalMart.com, Target.com and Sears.com," Post wrote.