Google's Search Dominance Grows

SAN FRANCISCO -- Google (GOOG)'s stock snapped out of its recent funk Tuesday after new data showed the Internet search leader is becoming even more dominant in the most lucrative part of the online advertising market.

Internet research firms comScore Inc. and Nielsen Online both said the volume of search requests at Google has climbed substantially over the past year, while rivals Yahoo! ( YHOO) and Microsoft ( MSFT) are losing market share.

The statistics, based on October search activity, bodes well for Google's fourth-quarter revenue because the Mountain View, Calif.-based company makes most of its money by showing ads alongside search results. Fielding more search inquiries generally gives Google more opportunities to show ads and pocket a commission.

Investors have been worried the worsening economy will slow Google's earnings growth, but they were apparently heartened by Tuesday's news. Google shares surged $18.39, or 7.1%, to $275.83 in afternoon trading. The stock has dropped by more than 30% so far in the fourth quarter, leaving it near its lowest levels in three-and-a-half years.

Google held a 63.1% share of the U.S. search market through October, up from 58.5% in the previous year, according to comScore. Yahoo ranked a distant second at 20.5%, down from 22.9% a year ago, while Microsoft's share stood at 8.5% vs. 9.7% in October 2007.

Nielsen Online pegged Google's October search share at 61.2%, followed by Yahoo at 16.9% and Microsoft at 11.4%.

Yahoo shares dropped 25 cents, or 2.5%, to $9.96 in Tuesday's afternoon trading, while Microsoft shares fell 73 cents, or 3.5%, to $19.96.

Despite its commanding lead, Google has been bracing for tougher times amid signs that the U.S. economy is headed into its deepest recession in a generation.

The company is trying to save money by serving fewer free meals to its employees and cutting its ties with a substantial number of its 10,000 temporary contractors. Despite the austerity campaign, Google says it's still adding more workers to its payroll of more than 20,000 full-time employees.

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