Google ( GOOG) may be an even bigger fish in the search pond than people believe.

The company dominates the search market to a greater degree than anyone has reported, controlling an "effective market share" of 90% to 95%, according to Trip Chowdhry, a managing director at Global Equities Research.

Using a different methodology, leading industry researcher ComScore, which released figures Monday for traffic trends in December, placed Google's market share at a 47.3%, compared with second-place Yahoo!'s ( YHOO) 28.5%.

Chowdhry arrived at the figure by asking industry contacts to tally their access logs, which show how a user landed on a particular Web site. ComScore, on the other hand, reports the data that it extrapolates from the roughly 2 million Web surfers around the globe who allow the research firm to peer into their Internet browsing habits, says Gian Fulgoni, ComScore chairman.

ComScore's method counts those searches launched on an engine as part of the market-share figure, even if the user does not click through to arrive at a Web site pulled up by the results.

Though the approach may be a good way to gauge browsing behavior, it is less important in assessing the type of market share that's important to investors, contends Chowdhry.

Looking at how users actually arrived at a Web site, instead of what they may have initially entered on a search engine, is more important because it offers clearer insight into how ad dollars -- and the associated revenue for the different engines -- will be allocated.

Searching for Dollars

Advertisers will be swayed by how users arrived at their own sites and dole out ad dollars accordingly, says Chowdhry, who dubbed it an "effective market share" when compared with the more commonly used "market share."

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) 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 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.

Google's "true market share" was closer to 70% when looking at traffic to a basket of Web sites, Skrenta added. "Let's look at search referral traffic the way a site owner would," he wrote, advocating his approach.

Looking at traffic with the lens of a site owner is important for investors as well, because most advertisers are, after all, also site owners. They may be as likely to turn to their own sites when assessing the merits of investing in ad campaigns on different search engines.

Most Wall Street analysts, meanwhile, continue to focus on the figures released by industry research firms when creating their estimates.

The rigorous methods and rich data generated by firms such as ComScore have many advantages over the kinds of back-of-the-envelope calculations used by Chowdhry -- who concedes that his sample size was far from scientific -- and Skrenta.

ComScore takes steps to ensure that its sample reflects the broader demographic of Web users, and transparency in browsing habits provides marketers with vital information, such as what types of products consumers are buying online.

Still, while the sophisticated and heavily publicized data by researchers such as ComScore, which releases figures to the press on a monthly basis, may be hard to miss, investors should keep the quick, crude calculations like Chowdhry's in mind as well.

The definition of what constitutes a better measure of market power is at the heart of the debate. And there, Chowdhry's "proof is in the pudding" approach provides valuable insights for investors as well.

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