May 3, 2007
Playing catch-up with Google
For those of you who haven’t been keeping score, this is how things stand in the internet advertising business, as revealed in first quarter earnings (the latest news, from AOL, was contained in Time Warner’s earnings on Wednesday.)
Net advertising ($m) Growth from year before (per cent)
Google 2,530 65
Yahoo! 980 9
AOL 549 40
Microsoft 350 (estimate) 23
Below the numbers, how are these companies doing?
AOL. The new advertising-driven strategy is starting to work. But AOL does not disclose traffic acquisition costs (which have been netted out of the Google and Yahoo figures) - and since the fastest growing part of its business is placing adverts on other publisher’s sites, climbing by 80 per cent in the quarter, these costs will be going up fast.
Yahoo. Just as it gets close to mending its search monetisation engine, another wheel on the wagon starts to go wobbly. Growth in display advertising has come down to under 20 per cent. Yahoo blames the shift to all that "non-premium" advertising inventory surrounding user-generated content, and hopes buying Right Media will help it navigate this new market better (in this interview, an early Right Media investor says what he thinks is driving the spate of acquisitions in online advertising.)
Microsoft. Some much-needed relief for Microsoft shareholders: advertising revenues finally climbing as AdCenter begins to click and the company claims classified growth in line with the market. It wouldn’t do to get over-excited, though: Microsoft still lost nearly $500m in its internet division in the first nine months of its fiscal year and falls further behind Google by the day.
The best hope for these companies is that Google’s attempt to kick-start its display advertising business with the purchase of DoubleClick misfires. Counting on your competitor’s failings, though, is not much to base a strategy on.
