Google, Yahoo, AOL, MSN: Big on Internet Advertising

According to data aggregator eMarketer, U.S. ad revenues at Google (GOOG), Yahoo (YHOO), AOL (TWX) and MSN (MSFT) represented 57.4% of all U.S. Internet ad spending  in 2006. Further, they estimate that the big will only get bigger, reaching 66.6% in 2007.

Below is eMarket’s chart in percentages and then a second chart representing dollars.

U.S. Online Advertising Revenues* at Top Four Portals As a Percent of Total Online Advertising Spending, 2004-2007
	2004	2005	2006	2007
Google	13.1%	19.2%	25.0%	32.1%
Yahoo!	18.4%	19.4%	18.3%	18.7%
AOL	6.8%	7.2%	7.5%	9.1%
MSN	9.4%	7.8%	6.7%	6.8%
Total for top four portals	47.8%	53.7%	57.4%	66.6%
Note: Numbers may not add up to total due to rounding; *net of traffic acquisition costs [TAC] Source: company reports, 2004-2007; eMarketer calculations, February 2007
www.eMarketer.com

As traditional marketers move more money online, they look for safety in established, mass-market brands, and portals are that, says David Hallerman, eMarketer senior analyst and the author of the new Portal Marketing: The Big Four report. Other than Google, the large portals are at least 10 years old, and all four average 100 million or more unique visitors monthly.

U.S. Online Advertising Revenues* at Top Four Portals As a Percent of Total Four Portals, 2004-2007 (Millions)
	2004	2005	2006	2007
Google	$1,264	$2,410	$4,095	$6,265
Yahoo!	$1,776	$2,439	$2,996	$3,641
AOL	$655	$905	$1,235	$1,772
MSN	$906	$979	$1,092	$1,318
Total for top four portals	$4,601	$6,733	$9,418	$12,996
Note: *net of traffic acquisition costs [TAC] Source: company reports, 2004-2007; eMarketer calculations, February 2007
www.eMarketer.com

All four firms have spectacular growth especially when compared to traditional media, which is considered mature or deflating. Google’s year over year growth is decelerating. As investors in Google, we are not concerned. When examining the data in terms of total dollars, the growth rate is still increasing. Further, much of the “this company must plateau” is well priced into the stock.

Disclosure (and continued conclusion): Long Google [GOOG].

Disclosure: Google Inc. is held in the Clear Large Cap Growth portfolio which is managed on a separate account platform. Mr. Corn is the founder and CEO of Clear Asset Management LLC and owns GOOG directly through his investment in the Clear Large Cap Growth portfolio.