April 24th, 2007 at 7:50 am
Advertising is the main revenue driver for the top four portals, in growth if not in sheer dollars. Shrinking subscriber access revenues at AOL and MSN have increased pressure on these portals to monetize pages using ads.
Competition among Google, Yahoo!, AOL and MSN is intense, and they each take a large share of US ad revenues. eMarketer estimates that nearly $13 billion will go to just those four sites in 2007.
In fact, Google and Yahoo!’s ad revenue (excluding traffic acquisition costs) alone will account for over half of all US online ad spending in 2007.
"21st Century Portals: Thriving in the Google-MySpace Era" report offers a similar accounting of US ad spending dollars, with Google and Yahoo! combining to take 40%.
Revenue concentration is even more pronounced in paid search. As Google grows and Panama (Yahoo’s search ad model) begins to deliver more customers for Yahoo!, about 90% of the format’s 2007 US revenues will come from only two companies.
eMarketer senior analyst David Hallerman says that success for Google and Yahoo! doesn’t mean their competitors will disappear.
"Whether or not the top four portals remain as configured today is an open question," says Mr. Hallerman. "In particular, some see AOL and MSN—the two smallest ones—on relatively shaky ground. But even though AOL’s total revenues are decreasing significantly year over year, its advertising revenue promises to make up for its loss of subscribers, at least in a few years."
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