Google taking share despite revenue decline in Internet advertising -- new IAB report

Google took substantial market share from their Internet advertising competitors in 1Q08. Google's U.S. Internet advertising revenue grew ~7% sequentially from 4Q07 to 1Q08, while the Internet advertising revenues of Google's competitors fell ~8% during that same period, per newly released IAB figures and Google's 4Q08 figures.  

• Google's Internet advertising dominance appears to be accelerating as all its sequential U.S. growth is coming from competitors' market share -- not from growth in the Internet advertising marketplace -- which appears to be one quarter into a sequential Internet advertising recession.
  • More simply, if Google was not able to take substantial sequential market share from its competitors in 1Q08, Google probably would not have grown revenue sequentially in the U.S last quarter. 

In 1Q08 Google now controls ~45% of all U.S. Internet advertising revenues, which is up from ~42% in 2007, which is up from 35% in 2006, and which is up from 30% in 2005 -- according to base numbers reported by IAB and Google.

• This means that in a few quarters, Google will control over 50% of all U.S. Internet advertising; the antitrust rule of thumb is that if a company controls 50% share of a market, it is considered "dominant." 
• If the market is defined more narrowly, like search advertising, Google commands ~75% of U.S. Internet advertising revenue per eMarketer, and ~80% market share of the European search market per ComScore. 
  • 90% market share is the rule of thumb when a company is considered a "monopoly." 
  • On Google's 4Q07 earnings call with analysts, Google officials claimed: "we are almost uniformily seeing a gain in market share."   

In 1Q08, Yahoo commanded ~22% of all U.S. Internet advertising, and their U.S. revenue was slightly down/flat sequentially 4Q07 to 1Q08 -- suggesting that smaller Internet advertising competitors are the ones losing big share rapidly to Google.

• This also means that in 4Q08 the proposed Google-Yahoo cartel now commands 67% market share of all U.S. Internet advertising.  
  • If one were to add the online advertising revenues of Google's other Internet advertising "partners," the potential cartel's revenue share could be over 70% of the U.S Internet advertising market.  

Bottom line:

What this analysis suggests is that Google has most likely already tipped to an search advertising monopoly, even before completing the DoubleClick deal in March, which will substantially increase Google's reach and network effects by giving Google direct relationships with the hundreds of top global advertisers that they did not yet have, and providing 25% of the Internet viewers that Google did not reach, but that DoubleClick did. (See my charts in my Googleopoly testimony before Senate Judiciary.) 

• So the real significance of the proposed Google-Yahoo cartel for the converging search and display market, is extending Google's search dominance deeper, farther, and faster into the overall U.S. Internet advertising market.
• The mounting evidence of Google's growing market dominance suggests that the Google-Yahoo partnership will face rough sledding with antitrust authorities responsible for ensuring that the Internet's monetization model remains competitive.