Search Dominates New Advertising Spending

Google and Yahoo are eating lunch on what used to be the expense accounts of the largest advertising and information venues in the world. Both Google and Yahoo reported record revenues last quarter, income that is expected to grow rapidly over the coming years. As the leaders of the search advertising pack, Google and Yahoo represent the wide end of an expanding wedge. According to Safa Rashtcy a senior analyst at investment bank Piper Jaffray, search revenues will increase by a staggering $18 billion over the next five years. Projected revenues are expected to surpass $10 billion in 2006, $13 billion in 2007, $16 billion in 2008, and $19 billion in 2009. By the end of the decade, revenues generated by search are projected to be in the $25 billion range. A report issued yesterday by search industry research and analysis firm Outsell says this growth is coming at the direct expense of the largest traditional media firms. The world's ten largest traditional information distributors are Reed Elsevier, Thomson, Gannett, Pearson, Tribune, Reuters, McGraw-Hill, VNU, Wolters Kluwer, and the Daily Mail and General Trust. In 2003, their collective revenue was approximately $56 billion, growing by about $4 billion to top $60 billion in 2004. Google and Yahoo combined generated about $6.5 billion in revenues last year. The year before, their combined revenues equaled about $2.5 billion. In other words, the combined growth of the two largest search firms over 2004 surpassed the combined growth of the 10 largest traditional media firms. Last month, Advertising Age predicted that search engine revenues would exceed those of the major TV networks by the end of this year. The Interactive Advertising Bureau said that revenues generated by all forms of Internet advertising in the United States alone grew by about 33% from 2003 to 2004 with overall revenues approaching $10 billion. Between the two, Google and Yahoo are starting to starve growth for traditional media and advertising firms. Outsell's report "