Yahoo, the perennial leader in U.S. display advertising, has lost its number-one spot in that market segment to arch-rival Google, according to an IDC report released on Thursday.
In this year's first quarter, Google's share of the U.S. display ad market rose to 14.7 per cent from 13.3 per cent in 2010's fourth quarter, while Yahoo's share shrunk to 12.3 per cent from 13.6 per cent.
The news has to be encouraging for Google, which for many years was a minor player in display advertising. However, it has made big investments to improve its position, including spending billions to acquire DoubleClick and YouTube.
For Yahoo, this development is troubling, since display advertising is its core business, offsetting its underpeforming search ad business.
Google dominates the search ad business with a share of almost 60 per cent in the first quarter, followed by Microsoft with almost eight per cent and Yahoo with seven per cent. A controversial search pact between Yahoo and Microsoft to counter Google's dominance has gotten off to a slow start, with Yahoo complaining that its revenue-per-search (RPS) isn't meeting expectations in markets where it is already using Microsoft's AdCenter platform.
A bit of good news for Yahoo and other traditional display ad providers like AOL and Microsoft from the IDC report is that Google's growth in display ads hasn't come at the expense of their own display businesses, which are powered by mostly by large, brand advertisers. Google is mainly tapping its core small and medium-size search advertisers to also spend on the Google Display Network (GDN), according to IDC.
"But that may change, and when that happens, the old stalwarts' lumbering sales organizations will have to compete with GDN's ultra-effective automated sales interface," IDC said in a statement.
Although it has unseated Yahoo from the top spot, Google needs to keep an eye on Facebook, which IDC expects will make a strong push in display advertising in the coming years.
The IDC study also found that online ad spending grew 14.3 per cent worldwide in the first quarter to $18.2 billion, while U.S. spending grew 14.2 per cent to $8.1 billion.
In a separate study also released on Thursday, the Interactive Advertising Bureau and PricewaterhouseCoopers pegged U.S. online ad spending growth at 23 per cent to $7.3 billion in the quarter.
Search advertising continues to be the most popular ad format, attracting 48.7 per cent of the quarter's spending, while display advertising was second with 33.3 per cent. However, over the past two years, display has been growing faster than search, according to IDC.
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