Google And Yahoo Surf Internet Ads To Stock Rise

A report from Merrill Lynch projects total online advertising could go as high as $12.4 billion USD this year.

News of buoyant online ad sales propelled the stock prices of two major Internet companies today. The surge in online advertising seems to be driven by greater adoption of broadband Internet services by consumers.

“We continue to believe that broadband growth is driving Internet traffic growth,” said Merrill Lynch analyst Lauren Rich Fine. “Especially with recent discounts by broadband providers, we believe this will drive more users online or to simply switch from dial-up connections to high bandwidth connections.”

Investors have pushed intra-day trading of Google and Yahoo up today. Google shares rose $5.69, or 2 percent, to $285.25 in afternoon trading on the Nasdaq, while shares of Yahoo jumped 81 cents, or 2.2 percent, to $37.44.

Search advertising could generate $5.6 billion USD this year, a figure that could double by the year 2009.

Analysts like the management team in place at Sunnyvale-based Yahoo; the portal firm has diversified revenue streams that also enhance its long-term prospects.

Meanwhile, Google has the benefit of a robust search advertising market. And, analysts feel Mountain View-based Google could enhance itself more by expanding into the music and shopping markets.

Merrill Lynch has maintained its “neutral” rating on Google stock, due to its high price per share; it has reiterated the “buy” rating on Yahoo.

David Utter is a staff writer for Murdok covering technology and business. Email him here.