This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

2005 Tangle: Google, Yahoo! Brace for Round 2

The online advertising business -- which gave investors no shortage of twists and turns in 2004 -- looks on track for more growth and more surprises in 2005.

Sitting squarely in the middle of the search-engine advertising business and responsible for much of the growth in Internet advertising, Google (GOOG) and Yahoo! (YHOO) will continue to fight for market share and users' attention.

Microsoft (MSFT), with its own investment in search technology, will continue to have people guessing about what impact it will have on the search business, and when.

And advertisers -- who have grown to appreciate the accountability and measurability of an advertising medium that requires them to pay only for people who respond to their ads, rather than the people who have been exposed to them -- are clamoring for more.

All investors have to do is figure out which of the many variables in search -- locally targeted advertising, Google's pace of innovation, and shopping-related search, for example -- will have the biggest effect on the market, and when.

While analysts acknowledge that the explosive growth of search over the past few years can't go on forever, the pace seems far from slowing down, given recent indicators. Earlier this month, the Search Engine Marketing Professional Organization trade group released research concluding that advertisers plan to spend 39% more on overall search marketing in 2005 than they will end up spending in 2004.

In one sign that advertisers aren't shutting their wallets, the SEMPO survey concludes that advertisers have seen a 26% year-over-year rise in the average amount they pay each time a user clicks on their ad -- but say they can spend 33% more per click and still end up with a profitable transaction.

"It's a big market now that will continue to grow significantly," says Ryan Jacob, portfolio manager of the (JAMFX) Jacob Internet fund. And that isn't its only significance for online companies, he says: Paid search "really legitimized Internet advertising in the minds of large companies."

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs