TELECOM Digest OnLine - Sorted: Web Search Revenue Seen Strong for Google, Yahoo

Web Search Revenue Seen Strong for Google, Yahoo

Lisa Minter (
17 Apr 2005 12:58:07 -0700

By Lisa Baertlein

Strong search advertising
revenues are expected to drive profits at Google Inc. and Yahoo
Inc. when they report earnings next week.

Some financial analysts and research firms flagged a decline in
"keyword" pricing during the holiday hangover months of January and
February, compared with prior months when pricing on retail-related
terms rose.

But several analysts who cover search companies are skeptical, saying
discerning trends is notoriously difficult because of the large number
of keywords available and variability within the group.

Web search advertisers set the prices on keywords through
auction-style bidding. They pay each time a Web search user clicks on
their ad, which links to their site.

For their parts, executives at Google and Yahoo each repeatedly have
said their growth has resulted from greater search volume rather than
price increases.

"People should be careful about extrapolating too much from a small
sample" of keyword prices, Google co-founder Sergey Brin said on the
sidelines of a recent cable industry conference in San Francisco.

Yahoo is scheduled to release earnings on April 19 and Google is due
to announce on April 21.

"Although there has been significant controversy over search trends
this quarter, the numerous data points we compiled indicate to us
continued strong momentum," American Technology Research analyst Mark
Mahaney said in a client note this week.

"We believe Google will outpace the industry," added Mahaney, who does
not own Google shares and whose firm does not provide investment
banking services.

Mahaney expects Google to beat analysts' consensus estimates when it
reports its first-quarter results. He sees Google posting a profit,
excluding items, of 99 cents a share.

The average targets compiled by Reuters Estimates call for Google to
post earnings excluding items of 91 cents a share.

Jeffrey Herzog, chairman and chief executive of iCrossing, a search
engine marketing company that helps advertisers create and manage
campaigns, said keyword prices are up from a year ago.

Analysts pegged their Google optimism on the company's international
growth, the expansion of its network of Web sites that carry Google
ads pegged to editorial content, and recent efforts to make Web search
ads more relevant to users.

"We would expect Google to again grow faster as it is much further
along in the monetization process, has a stronger international
presence, and is benefiting from expansion of its contextual
advertising network," Lehman Brothers analyst Douglas Anmuth wrote in
a client note last week. Lehman Brothers was one of the underwriters
on Google's IPO.

Anmuth's target calls for Google to post first-quarter net revenue of
$739 million, up 13 percent from the prior quarter, and earnings,
excluding items, of 91 cents a share.

He projected 12 percent quarter-over-quarter search revenue growth for
Yahoo during the first quarter of 2005.

Mahaney sees Yahoo posting 13 percent growth in the same time frame --
largely driven by volume growth -- and net income of 11 cents a share,
matching analysts' average target.

"Our belief in continued strong search growth was reinforced by public
comments by Yahoo and Google executives, as well as by numerous
conversations we've had with other public and private search
companies," Mahaney said.

Copyright 2005 Associated Press.

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