Gauging Google's Bite

Google's outsized role in drawing audiences to Web sites may be a testament to the company's celebrated search algorithm, and this could translate into more-relevant search results for users.

Its dominance may also be attributable to advertisers already spending more on Google's advertising system than that of competitors, increasing the likelihood that users will see a relevant ad and click through to a site.

Either way, Google stands to benefit from a virtuous cycle as advertisers continue to shovel more money toward the engine they see generating the most results for them, says Chowdhry.

Chowdhry estimates that Yahoo! commands an effective market share of between 3% and 5%; Microsoft's(MSFT Quote) MSN registers at less than 2%.

While Google already controlling so much of the search market may seem like a negative sign -- how much more can the search giant garner? -- Chowdhry says this worry is offset by the rapid growth in the search market, which he estimates is growing at about 100% year over year.

That still leaves plenty of upside for Google's stock, according to Chowdhry, who reiterated his $600 price target Tuesday. Google's shares have rallied $37.41, or 8%, to $505 so far in 2007.

Though Chowdhry's estimates may be the first that credit Google with so large a market share, this isn't the first time commentators focusing on a site's access logs have complained that Google's share is severely underestimated when compared with numbers put out by mainstream research firms.

Truth and Advertising

Richard Skrenta, CEO of Topix.net and a former AOL veteran, wrote on his blog in December that "every month I have to suffer through reading about Google's supposed 40-something percent market share."

"Everybody involved in the search industry and everyone who actually runs a Web site knows these numbers are completely wrong," wrote Skrenta, taking issue with researcher HitWise, which uses an approach similar to that of ComScore.