Google ( GOOG) continued its journey back to $200 Monday, thanks in part to an encouraging online advertising report from Goldman Sachs.Shares in the paid search phenomenon rose $5.78 Monday to $198.57, continuing a rally that has added 17% to Google's share price since Dec. 8. Shares in Google, which went public in August at $85 a share, peaked at $201.60 Nov. 3 before falling as low as $161.31 later that month. Boosting Google's shares Monday was a report from Goldman Internet analyst Anthony Noto, who raised his fourth-quarter advertising estimates on both Google and Yahoo! ( YHOO). Yahoo!'s stock rose 24 cents to $37.92. In his report, Noto says the paid search advertising sold by Google and by Yahoo!'s Overture Services is benefiting from the quantity of searches and the prices that advertisers are bidding for advertising keywords, both of which are better than expected. But Noto pays much greater attention in his report to the state of branded online advertising -- the banners and other pictorial ads, including animation and video -- rather than the text ads that are keyed to Internet users' queries on search engines, or to the editorial content of a page in which the text ad appears. On the basis of conversations with media buyers in mid-November and mid-December, Noto concludes that, as far as branded online advertising is concerned, it's "a heavy, heavy ad market." Demand -- particularly from seasoned online advertisers rather than new entrants -- is increasing, says Noto, particularly for more elaborate advertising, also known as "rich media," and particularly for placement on major portals, starting with Yahoo!. "We believe that branded online advertising," writes Noto, "is ... beginning to transition from a test or trial marketing tactic for large branded advertisers to a more permanent component of the overall advertising/marketing mix."
Some of that demand, writes Noto, is trickling down to specialty sites such as the technology news and information site CNet ( CNET) and the female-focused iVillage ( IVIL). Branded online advertising is "poised for a breakout year in 2005," writes Noto, whose firm has done banking for both Google and Yahoo! within the past year. (Noto calculates a per-share "implied value" of $215 for Google and a range of $39 to $44 for Yahoo!.) As for Noto's new estimates, he says Google's net revenue will amount to $592 million in the fourth quarter, up from his prior estimate of $579 million, and ahead of the Thomson First Call consensus of $584 million. Earnings before interest, taxes, depreciation and amortization will amount to $378 million, says Noto, compared with the First Call median of $358 million. Yahoo!'s fourth-quarter revenue will be $773 million, says Noto, ahead of the consensus of $754 million. EBITDA will amount to $322 million, he says, ahead of the $308 million mean. The accuracy of those new estimates won't be be tested for several weeks: Yahoo! is slated to release fourth-quarter financial results Jan. 18, and Google is scheduled to disclose its quarterly numbers Feb. 1.