Google has been tweaking its AdWords advertising system to boost profits during the last quarter of 2006.
When a company has a dominant market share, it can raise prices and significantly increase profits. John Aiken, managing director of New York's Majestic Research Corp., says consumers increasingly use online searches to check out products they buy offline. As a result, traditional retailers are spending more on search ads. Mr. Aiken estimates the average price advertisers paid for a search ad on Google rose 2.5% during the fourth quarter of 2006 from the third quarter or roughly a 10% annualized increase.
Google's share of the global Web-search market rose during the fourth quarter of 2006. The Mountain View, CA, company handled 47% of U.S. searches, up from 44% of U.S. searches the prior quarter, according to comScore Networks Inc.
In its recent earnings conference call, Microsoft acknowledged losing some search market share. Yahoo said search revenue from its sites increased less than 10% from a year earlier. Google likely profited from their weakness, grabbing a bigger chunk of online search dollars.
Analysts expect the Google search monopoly to report that earnings excluding one-time items rose 90% in the fourth quarter of 2006 from a year earlier to $2.92 a share, according to Thomson Financial.
Source: The Wall Street Journal, January 31, 2007