• by April 26, 2006

Google and Yahoo both reported solid first quarter results last week, indicating that any concerns over a slowdown in the search advertising market may have been premature. Still, both companies will need to push the outer bounds of the category to uncover new places to take search--more than likely, off the desktop.

Merrill Lynch noted that Google's advertising share and growth appears on track to continue, and that its consumer offerings continue to sell themselves with marketing costs at just 12 percent of revenues. Too, Merrill analysts note that Google's Web sites remain under-monetized. Now that's something we should keep tabs on.

Meanwhile, Merrill notes that Yahoo faces a few challenges, including search query share loss and user/usage loss to social networking sites. The second one might not be as big an issue in the end, because we're certain Yahoo will finesse its own social networks.

Analyzing the finer points behind the Google/Yahoo search picture, ComScore Media Metrix' comScore qSearch reports that the total number of searches conducted on Google rose 36 percent to 2.7 billion in March 2006, versus a year ago. That's staggering, at least to this here Minute. During the same time period, searches conducted on Yahoo Search totaled 1.6 billion, an increase of 8 percent over the prior year.

ComScore also reports that in March 2006, 1.4 billion searches conducted on Google included a sponsored ad (up 50 percent versus year ago). During the same period, 942 million searches conducted on Yahoo Search included a paid ad (up 30 percent versus the prior year). During the past year, Yahoo has substantially increased the percent of its searches that contain a sponsored ad (49.7 percent to 59.7 percent), a figure that now exceeds Google's (52.9 percent).

Too, comScore qSearch found Google's volume of sponsored clicks grew to 322 million in March 2006 (up 64 percent), while sponsored clicks on Yahoo Search totaled 180 million (up 30 percent from the previous year).

"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. "Approximately 11.4 percent of Yahoo and 11.8 percent of Google's searches resulted in a click on a sponsored ad. These click-through levels are substantially higher than those seen with traditional banner ads, indicating the extremely high relevance and impact of search-based advertising."

Nielsen/NetRatings finds that Google and Yahoo are outpacing overall search growth and continue to increase in market share. But beyond that, Nielsen finds that an analysis of top TV search terms in March reveals a convergence between online search and television programming.

Nielsen reports that among top television search terms in March, "American Idol" topped the list, followed by soap opera "Days of Our Lives," and "Deal or No Deal." The "American Idol" finding isn't all that surprising, since fans vote for their favorites online. But Nielsen is finding a deeper symbiotic connection than ever between TV and online content consumption.

Finally, U.S. Internet advertising totaled $12.5 billion, up 30 percent year-over-year, according to the Interactive Advertising Bureau and PricewaterhouseCoopers. Total estimated search, up 34 percent year-over-year, continues to outpace branded online advertising, up 14 percent, while branded display advertising was up 37 percent. Search captured 41 percent of online ad dollars, branded 34 percent, and everything labeled "other," the last 25 percent.

Consumer-related ads scored 51 percent market share to drive total online ad spending. The IAB report finds that consumer-related industries (led by retail and autos) outpaced total Internet ad growth, while computing and financial services declined.