Google losing ground in internet advertising

Internet search giant Google has seen its share in the Internet advertising market fall for the first time in 2 years.

According to market research company IDC, Google’s advertising market share fell to 23.7% in the fourth quarter of 2007, a 0.5% fall compared to the third quarter. Year-on year sales growth also slowed down in the fourth quarter to 40%, down from 50% growth in the third quarter.

IDC say that Google has experienced this set-back in spite of healthy growth in the U.S internet advertising industry. Companies are continuing to move advertising away from traditional media and onto the internet. The industry grew by 27% in 2007 to $25.5 billion; in the fourth quarter alone, spending on internet ads increased 28% compared to the same period in the previous year.

Google’s lost ground will be seen as an important opportunity for rivals Microsoft and Yahoo. IDC says that a merger between the two companies would give them a combined internet advertising market share of 17%. This figure is still a long way behind Google’s 23.7% share, but according to IDC, if they want to challenge Google then a merger “would give them a much better fighting chance than if they went it alone.”