Yahoo! Giving Web Ad Market a Shout

The Big Tent

Related to pay-per-click search engine advertising is paid inclusion -- fees the company would get in return for combing through sites of businesses that want pages to be considered for inclusion in relevancy-based search results (as opposed to Overture's payment-dependent results). Piper Jaffray's Safa Rashtchy notes that paid inclusion is worth $100 million in annual revenue to Microsoft's MSN.

Conventional online brand advertising will grow alongside paid search, analysts believe.

Rashtchy forecasts that online brand advertising at Yahoo! in the third quarter will grow to at least the top end of the 8% to 12% year-over-year growth guidance. (Rashtchy has an outperform rating on Yahoo!, his firm's parent company provides commercial banking services to Yahoo!, and Piper Jaffray has received investment banking compensation from Yahoo! in the past 12 months, or hopes to within the next three months.) From 2004 through 2008, Hodge estimates that Yahoo!'s branded advertising revenue will grow at a 25% compound annual growth rate, compared with a 19% rate for its paid search.

Meanwhile, other areas of the company are growing as well. In a note last month, Pacific Crest Securities said its research indicated that Yahoo!'s HotJobs employment business had shown four consecutive weeks of growth in the number of jobs listed by potential employers, with listings up 23% from a month before. "Although not directly correlated to revenue, the survey is directionally significant, in our view," wrote analyst Steve Weinstein.