Yahoo’s (YHOO) share in the Web-search market grew nearly half a percentage point in July, but Google Inc. (GOOG), despite losing the ground to Yahoo, maintained its dominance in the U.S. search engine market, as shown by figures released by Internet market research company comScore Inc.
Search engines make money when users click on the text ads placed beside search results. Web queries are an important element in helping search engine optimization and web advertising firms decide where to put their money. New York-based eMarketer estimates that the U.S. search advertising market will expand 16% in 2010. This year, the overall online advertising market is expected to grow 11%, eMarketer estimates.
Yahoo, which saw its search advertising revenue fall 8% in the most recent quarter, has been working on increasing the interactive elements in its search results in order to attract traffic. Although the share gain is encouraging, the company’s ability to grow traffic even as its search business goes through a transition could be challenging for Yahoo going forward.
Yahoo, with nearly 17.1% of the “explicit” web searches in July, versus June’s 16.7% share, grabbed the 0.4% advance from Google, which saw its share of searches dipping to 65.8% in July from June’s 66.2%. Bing, owned by Microsoft (MSFT), maintained its perch at the No. 3 spot with 11% of all searches in the U.S., unchanged from June. In all, there were 15.6 billion searches in July, comScore said.
After a controversy over how it defines web searches, comScore changed the way it measures monthly search engine figures and introduced the concept of “explicit core searches” alongside the contextual searches that include slide show searches and artificial pop ups that may not be of users’ perceived interests. Explicit core searches exclude slide show features and reflect intent on part of the users to conduct a search.
To challenge Google’s dominance of the online search market, Yahoo and Microsoft had announced a ten-year Internet search partnership agreement in July 2009 that would give Yahoo 88% of the revenue from web search ads appearing on its network of both owned and operated as well as its affiliated sites. Microsoft had said it would provide its Bing search engine to power searches on Yahoo sites.
Continuing that relationship, Yahoo and Microsoft announced recently that they would begin gradually transitioning searches conducted by users on Yahoo’s site to Microsoft’s Bing. The companies said users in the U.S. and Canada would see a “Powered by Bing” tag at the bottom of the Yahoo search page. However, it remains to be seen if a pre-holiday transition is possible.
We have a Zacks #3 Rank (short-term Hold recommendation) on Yahoo’s shares.
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