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Mar 20, 2008

NEWS: Google's Challenges Echo Yahoo's Struggle To Remain On Top

clipped from: money.cnn.com

Google's Challenges Echo Yahoo's Struggle To Remain On Top

SAN FRANCISCO -(Dow Jones)- In 1999, it would have been presumptuous to compare the fledging online search company Google Inc. (GOOG) with the world's most popular Internet portal, Yahoo Inc. (YHOO).

"People felt these companies could do no wrong in 1999 and 2008. Now that Google's stock has fallen 40%, the tough questions are starting to manifest themselves," said Scott Kessler, analyst at Standard & Poor's. "I'm not sure that they are prepared for this kind of environment."

But as happened to Yahoo, Internet users again are shifting their behavior - they are now searching less and spending more time on social networks such as News Corp.'s (NWS) MySpace and startup Facebook, where they bypass search engines and seem to ignore ads. (News Corp. owns Dow Jones & Co., publisher of The Wall Street Journal and Dow Jones Newswires.) Google was quick to recognize the threat, and the opportunity, but its early attempts to monetize ads on MySpace haven't gone well.

Google, which declined to comment for this article, is by no means standing still. It is attempting to expand its advertising base by developing and buying technology that will enable it to serve up display and video ads on the Internet - and eventually on mobile phones as well. The search giant is also rolling out a platform that lets marketers place ads on radio, television and in print media. But Google has little to show for its efforts so far.

Yet, Hering said Google has a long way to go to prove that its multiplatform approach will work. Elizabeth Ross, president at Omnicom Group Inc.'s (OMC) Tribal DDB interactive advertising agency, added that it has been relatively easy for Google to count when Internet users click on text ads, but she said measuring how consumers respond to brand messaging will be far more difficult.

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