Google outperformed the overall Internet advertising market by a factor of almost 1.5, and its closest competitor Yahoo by a factor of two, IDC said in a report released Tuesday.
Google's share in the quarter was 23.7%, down from 24.2% in the third quarter. The decline was caused by Google's quarter-to-quarter revenue growing by less than the overall market, 11.8% versus 14.1%, respectively.
However, compared to the same quarter in 2006, the company's market share grew by 2.1%. Sales increased 40.2% in the fourth quarter of 2007 from a year ago to $1.726 billion. Google easily beat the overall market growth of 27.5%.
For Yahoo, the numbers were unlikely to give it any ammunition to fight a $44.6 billion takeover bid from Microsoft, which believes a combined company would be in better shape to compete against Google. Because Yahoo underperformed the overall market, its share dropped to 11.4% in the quarter from 12% a year ago. "IDC believes Yahoo will likely eventually agree to an acquisition by Microsoft," the research firm said in the report.
Yahoo's revenue growth, however, has been improving, increasing 21.7% over the fourth quarter of 2006 to $832 million. Revenue growth rates have been improving steadily from a low of 2.1% in the first quarter of 2007.
Microsoft remained in third place at about half the size of Yahoo. Microsoft's U.S. online advertising revenues grew 23.6% from a year ago to $411 million. The company's market share, however, declined to 5.6% from 5.8%.
"IDC believes the proposed $44.6 billion acquisition of Yahoo by Microsoft would create a formidable new challenger to Google," the report said. "However, integration issues would push out positive effects of a merger at least two years."
Given the standing of Yahoo and Microsoft, IDC said it was unlikely Google would be able to convince regulators that a merger between the No. 2 and No. 3 players would stifle competition. "Google perceives Microsoft's move as a potential threat," the report said. "However, we see little reason to believe Google's position has merit.
"A Microsoft-Yahoo would increase competition by creating a more viable competitor while creating no monopoly in any segment of the advertising industry."