New ad kings: Yahoo, Google. (cover story)

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Author: Oser, KrisJohnson, Bradley

Yahoo and Google's total ad revenues this year could rival the combined prime-time ad revenues of ABC, CBS and NBC-a stunning achievement for the companies and a watershed moment for the Internet as an advertising medium.

The dot-coms reported astronomical growth rates again for the first quarter, and if their ad revenues are projected out for the year they boost them to the same league as media giants such as Gannett Co. and the New York Times Co.

Google's U.S. ad revenue-not broken out as such by the company-was an estimated $757 million for the first quarter, implying a full-year figure of roughly $3 billion, said David Hallerman, senior analyst at online market-research firm eMarketer. Yahoo's first-quarter ad revenue came in at an estimated $715 million for an extrapolated $2.9 billion for the year.

Combined figures for Google and Yahoo about equal the $6.2 billion in 2004 prime-time ad revenue collected by ABC, CBS and NBC, according to Broadcast Cable Financial Management Association data. (Those three networks had total 2004 ad revenue across all dayparts of $11.7 billion.)

The Internet powerhouses are also gaining parity with big newspaper groups. The New York Times Co.'s News Media Group had 2004 ad revenue of $2 billion, according to its 10K filing. Gannett's newspaper ad revenue was $4.9 billion.

"The results from Google and Yahoo combined with softness in traditional media, offer the strongest evidence yet of the dramatic changes occurring in the media and marketing landscape," Tony Mastin, analyst at William Blair & Co. wrote.

In terms of measured media spending, the Internet was already bigger than outdoor, TV syndication and national newspapers, according to TNS Media Intelligence.

The two mega-Internet brands are accelerating along with a rocketing medium, of course. Internet ad spending is projected to grow 21% this year, according to eMarketer. But Yahoo and Google are growing faster than that. Google's was triple that-72% for the 2005 quarter over 2004's first quarter. Yahoo's ad revenue grew 36% for the 2005 quarter. "[Google and Yahoo's results] lift the entire online boat," Mr. Hallerman said.

Because they are such leaders, Google and Yahoo also have a larger share of the online ad dollars than offline companies.

"The continuing growth even after a great [2004] year-it's like a player having an MVP season and continuing to hit even better the next year," Mr. Hallerman said.

Time Warner       $79.8
Google            $59.2
Walt Disney Co.   $55.9
News Corp.        $48.7
Yahoo             $48.4
Gannett Co.       $19.1
Tribune Co.       $11.8