Google is the Internet’s dominant search company with about 60% of the global market for search compared to a 15% share for second place Yahoo (YHOO). But (The 2009 launch of Microsoft’s new search engineer Bing has only slight moved the gages.) Google’s big technology lead right now is in software that matches the ads that users see on their search page to their queries. The better the match, the more times users will actually click on the ad, and the more conversions–clicks that generate sales or requests for more information, for example. And since advertisers increasingly pay for conversions, the company with the best matching software will earn the highest ad rates. Investors need to remember that while ad growth at Google, Yahoo, Microsoft (MSFT) and other competitors has been extremely rapid before the recent economic slowdown (ad revenue from Google-owned sites climbed 68% in 2007), the Internet advertising market is still in its infancy.
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