No Time Lost on Search [8/5/2005]

Though search drives revenue at Google and Yahoo, email and messaging dominate the time spent on the portals.

Google generates nearly all of its revenue from search advertising, but search accounted for only 21 percent of the time that U.S. visitors spent on its site during June, said Majestic Research. In contrast, 45 percent of the time was spent on Gmail, Google’s beta email service.

Competitor Yahoo won nine times more total minutes than Google in June—101.4 million minutes vs. 10.8 million—but only 2 percent was spent on search. In contrast, 42 percent of time spent on Yahoo was devoted to Yahoo Mail, and 22 percent to Yahoo Messenger.

Majestic Research analyst John Aiken said the main reason Google’s number of visitor minutes was so far below Yahoo’s is that the younger company does not yet have an instant messaging client, and Gmail is much less established than Yahoo Mail.

But time spent is different than the unique visitors or page views, which are usually used to benchmark sites and price advertising. Eighty-eight percent of Google’s unique visitors accessed its search site in June, compared to 55 percent of Yahoo’s unique visitors. The sites had 80 million and 118 million unique U.S. visitors overall, respectively, according to the report published July 29.

Meanwhile, Gmail accounted for only 6 percent of Google’s unique visitors, while 55 percent of Yahoo’s unique visitors used its mail and 19 percent used its messaging service. Yahoo Messenger has actually lost 200,000 unique visitors per month over the last year.

Mountain View, California-based Google recently reported second-quarter revenue of $1.38 billion including traffic acquisition costs, 89 percent of that search-related, according to Mr. Aiken. Sunnyvale, California-based Yahoo had revenue of $1.25 billion in the second quarter of 2005. Excluding traffic acquisition costs, a third of that was generated by search.

And the gap between the two companies’ dependence on search is growing, said Mr. Aiken. He noted that Google’s domestic click-through rate has grown approximately 50 percent year-over-year while Yahoo’s has remained flat.

That’s due, said Mr. Aiken, to Google’s revenue-optimized system of ad placement—which combines the relevancy of the nearby content with what an advertiser is willing to pay. Yahoo prioritizes only based on the advertisers’ set prices. But Yahoo’s search caters to a different user base, said Mr. Aiken.

“Yahoo’s strategy definitely includes search; it’s the fastest-growing segment of online advertising,” he said. “But where most Google searches are very directed, and the ROI is very high, Yahoo has increasing numbers of searches coming from a subchannel—finance, dating, [et cetera].”

The benefit of Yahoo’s search, said Mr. Aiken, is that “they’re actually generating searches based on content, even if the conversion rate on search is slightly lower.”

Source of Article: Red Herring

Date of Article: August 2, 2005

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