Microsoft’s Hopes In Mobile Search and Advertising; Google’s Wins

Microsoft (NSDQ: MSFT) held its annual financial analysts day, and talked in large part about it online businesses (our paidContent coverage is here). The company also talked about mobile advertising and search, and some extracts and comments on it from Lehman analyst Doug Anmuth, in his weekly email report this morning:

Pervasive search: The potential for pervasiveness of the internet and search across all devices is likely to power growth of the internet going forward by an order of magnitude. Microsoft emphasized that over time most consumer devices are likely to incorporate internet connectivity, making digital a more prominent delivery mechanism of content and communications going forward. The company believes this change will lead to a significant transformation across the economy. Lehman’s take on this: Over time, as more devices are internet-enabled, we agree that users are likely to rely on search to navigate the Web across these newer devices. However, of the three largest search engines–Google (NSDQ: GOOG), Yahoo! (NSDQ: YHOO), and Microsoft–we believe Google seems likely to be the natural choice to extend its share across newer devices given its 62% domestic market share (comScore) and its continued focus on, and investment in, innovation…Using mobile as a potential read-through of search habits on new devices we point to a recent study by Nielsen Mobile which stated that in 1Q08, Google accounted for 61% of total mobile searches and Yahoo! accounted for 18%. These results were roughly in line with PC based search share over the same period.

Mobile advertising: During the presentation Microsoft demonstrated its mobile advertising capabilities based on its Aquantive and Screen Tonic capabilities and stated that it is currently generating over 400 million ad impressions per month and that its mobile display ads are being served in eight markets worldwide. Lehman’s take: With more mobile devices building in full web browsers (like the iPhone) and as mobile network speeds improve, we believe mobile internet usage will rise and users are likely to replicate their surfing on the mobile internet as they would their PC based internet experience. Of the major internets, we believe Google benefits disproportionately from mobile Internet adoption based on its current share of PC searches.

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