Analyst Sees Strong Paid Search Market Over Holidays

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Goldman Sachs raised its earnings or revenue estimates for Google and Yahoo yesterday, citing strong growth of paid search and Internet advertising during the holiday shopping season.

Anthony Noto wrote in a research note that he expects Google and Yahoo to beat their sales estimates for the fourth quarter thanks to strong demand from advertisers. Noto based his estimates on conversations with top media buyers from Nov. 15 to Dec. 15.

Google and Yahoo benefited from a higher volume of clicks on paid search listings and rising click prices, he said. Yahoo also was helped by quarterly growth in display ad demand.

Robust holiday e-commerce helped boost paid search spending. Analysts from Nielsen//NetRatings, Goldman Sachs and Harris Interactive peg 2004 holiday e-commerce sales up 25 percent from a year earlier.

Noto said Google could return 76 cents per share in earnings for the fourth quarter. Google does not provide financial guidance. Goldman Sachs previously expected Google to make 74 cents per share in the quarter.

Yahoo should see higher sales, Noto wrote. He raised his fourth-quarter revenue estimate from $747 million to $773 million. Noto maintained his 13-cents-per-share fourth-quarter earnings forecast for Yahoo.

Brian Morrissey covers online marketing and advertising, including e-mail marketing and paid search, for DM News and To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting

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