Yahoo gains from Google shift

August 12, 2008, 2:50 PM UTC

By Yi-Wyn Yen

Finally, some good news for Yahoo. Major tech advertisers are shifting a bit of the money they spend on Google (GOOG) to Yahoo (YHOO), according to a new report by marketing firm Covario.

Advertisers from 12 tech companies, including Research In Motion , Hewlett-Packard , Intel (INTC), and Lenovo, collectively moved 4% of their U.S. search advertising budget from Google to Yahoo in the second quarter. Covario notes this is the first quarter that spending for Yahoo’s paid search increased in two years.

However, the incremental shift should give little reason for Google to worry. These tech advertisers, whose online ad spending is tracked by Covario, are still spending the bulk of their money on Google. The search king received 81.2% of the paid search spending from these advertisers for the second quarter compared with just 14.3% for Yahoo. Microsoft (MSFT) came in a distant third with 4.3%.

Wall Street analysts say the small shift in ad dollars from Google to Yahoo is not surprising. Google has deliberately throttled back on paid search – those blue text ads that appear on the right side of a Google search results page – to give Internet users a better browsing experience. Direct marketers who still want to place their ads somewhere could be moving their spending to Yahoo.

Explains Thomas Weisel analyst Christa Quarles: “Say I type in ‘Harry Potter’ into Google. I don’t get any ads. But put those keywords into Yahoo and you get ads up the wazoo. The bigger question is, has Google gone too far with their initiative?”

Jonathan Rosenburg, Google’s top executive for product management, says the company is unlikely to change its game plan. During Google’s earning call last month, Rosenburg acknowledged that ads shown on the site were “at an all-time low relative to the last few quarters.” The company will continue to work on improving the quality of its ads. “Larry [Page] often says that we’d be best off if we just showed one ad, the perfect ad,” Rosenburg said.

If Google doesn’t reverse its less-is-more policy, Yahoo could continue to benefit from a shift in ad dollars for the current quarter.