• Speaking of reports, in its Global Search Advertising Spend Analysis for Q3 2011, independent search marketing agency Covario noticed an impressive rebound in paid search spend during the third quarter, up 26% quarter over quarter and 24% over the same period last year. Study author and Adotas contributor Craig Macdonald, Covario senior vice president and chief marketing officer, attributed the rebound to strong back-to-school spending and increased investment in the Asia-Pacific region.

• Underdog Media announced that Jeff Hirsch is its new chief executive officer. Most recently Hirsch served as president of AudienceScience, but before that co-founded Fastclick and had multiple executive roles at ValueClick.

• Exchange operator adBrite has added Rick Cotton as its chief revenue officer. A 20-year veteran of digital sales, Cotton was last seen holding down the senior vice president role at Monster.com while simultaneously serving as general manager of the FastWeb.com division. Before his Monster stint, Cotton served as general sales manager for CBS radio.

• Former Gracenote President and CEO Craig Palmer will take the CEO’s chair at collaborative content network Wikia. Palmer has named Jennifer Betka senior vice president of marketing. Betka boasts experience developing brand and audience at AOL, Time Warner, Veoh, SIRIUS XM and The Los Angeles Times.

• Guess who’s got two G in its name and still accounts for 65% to 66% of all searches (depending on who is counting)? comScore has search “rivals” (in the loosest meaning of the term) Yahoo! at 15.5% and Bing at 14.7% for September 2011, while Experian Hitwise puts them at 15.2% and 12.8%, respectively.

• The legacy online portal world is a total soap opera: while Yahoo! cofounder and former CEO Jerry Yang is trying to raise the cash to take that company private, AOL CEO Tim Armstrong is apparently pushing AOL stockholders on selling the company to Yahoo!.

• Virtual goods inventivizer Ifeelgoods has teamed up with Universal Pictures to promote caper comedy “Tower Heist” with a scavenger hunt for 1 million Facebook Credits. Facebook users receive Credits for discovering “Heist” buttons around the network and are incentivized for sharing the game on Facebook or inviting friends to play.

• Social media dashboard HootSuite has acquired location-based marketing tool Geotoko. According to HootSuite’s blog, “The Geotoko technology reports on geo-based social media interactions like key influencers, customer sentiment, and demographic patterns to help businesses draw conclusions about audience behavior, as well as help brands reward customers for checking-in via Foursquare and Facebook Places.”

• Digital video advertiser Brightroll has expanded into Germany, naming former FOX Networks executive Patrick Edlefsen as head of the just-opened Hamburg office.

• Thanks to a new partnership, eBay will integrate Facebook’s Open Graph protocol into the X.commerce, Magento and GSI e-commerce platforms, allowing merchants to incorporate not just “Like” buttons, but also the new “Want” and “Own” buttons introduced with Open Graph tags.

It’s actually the first time in Internet history that Yahoo! has been knocked out of the top spot — surely not an event they’re celebrating in Y-town.

The Google Display Network benefitted from both increased display spend and a nice bump in revenue — its percentage of display revenue share increased from 13.3% in 4Q10 to 14.7% in 1Q11. Yahoo!’s share, on the other hand, declined from 13.6% to 12.3% over the same time period.

IDC’s Karsten Weide analyzes:

“We expect further pressure on traditional display ad publishers such as Yahoo!, Microsoft and AOL. GDN for now does not threaten them directly since their primary client base are brand advertisers, while the GDN for now mostly attracts SMBs. 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.”

While Facebook already serves far more display impressions than either Google or Yahoo, its ad revenue is so low because the impressions are so cheap. Eventually, with improved targeting and smarter products, CPMs and CPCs will go up and the social network could come dominate the space in terms of revenue. Facebook’s primary advertisers are those same local SMBs that boosted GDN’s revenue.

In general, worldwide spend increased by 14.3% year over year — from $15.9 billion in 1Q10 to $18.2 billion in 1Q11. In the U.S. alone, the pop was 14.2% — from $7.1 billion in 1Q10 to $8.1 billion in 1Q11. IDC estimates quarter-over-quarter increases of 13.3% to reach $8.3 billion in 2Q11, and a 13.8% bump for full-year 2011, reaching $34.6 billion versus $30.4 billion in 2010.

Also interesting, revenue from display advertising is growing at a faster rate than search — display revenue accounted for 33.3% of online revenue compared with 29% two years ago (remember the dark times?). Search’s share of online ad revenue declined to 48.7% versus 53.4% two years ago.

Worldwide spending on Internet advertising contracted for the second consecutive quarter, by 5%, to $13.9 billion from $14.7 billion in the same quarter a year ago, according to market research group IDC. U.S. spending declined for the second quarter in a row, by 7% year over year, to $6.2 billion from $6.6 billion.

All major advertising formats saw year-over-year revenue losses, with search ads being least affected, display ads losing 12%, and classifieds shrinking 17%. All major publishers’ ad sales declined, for the most part at double-digit loss rates, with Google being the only exception, posting low single-digit growth. Monster.com saw a 31% decline, suffering from the terrible condition of the classifieds business in the current downturn, and AOL was also hit hard, by both the weakness in display ads as well as internal sales problems.

The IDC expects U.S. advertisers to decrease their online spending quarter over quarter in in the third quarter by about the same amount as they did in the first and second quarters of 2009. But….

“We think the industry will continue to see losses in the third and fourth quarters, but the growth rates – or the loss rates, if you will – will eventually begin to improve. However, we also believe the industry may have to wait until mid-2010 until it sees real growth again,” according to Karsten Weide, program director, Digital Media and Entertainment at IDC.

MySpace Local is working with a test group of users to enlist a first round of review, and it will beta launch for all users nationwide next month. It enables conversations around content, representing both an evolution in social discovery and a revolution of MySpace’s larger content strategy. MySpace and CitySearch will share the revenue generated on MySpace Local.

Hadley Reynolds, from IDC, said this is the next round of the local information services business, the hard core of most of the newspaper business and the prize for any number of emerging web brands. He added that the local city guide site’s recent strategy is built in part on the perception that the social networks are quickly crowding out newspapers for user eyeballs and cycles, and Citysearch sees an opportunity to recharge its own growth by connecting to a pre-packaged large audience for local content and advertising.

“It’s a smart strategy for MySpace and Citysearch,” agreed Neil Strother, an analyst with Forrester. “It clearly helps the MySpace user connect with local restaurents and bars and allows the two companies to leverage some of that data.”

MySpace Local will generate more immediate advertising dollars for MySpace, said Caroline Dangson, IDC Social Media Research analyst. The biggest opportunity for MySpace Local is on the mobile platform, she said, where users can search for local restaurants and invite friends to join them. MySpace says they are working on rolling this out but did not give a specific timeline.

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Google continued its relentless forward-march with about 24.8% net ad market share in the first quarter, up a few ticks from 23.1% in the same period last year. IDC noted that its domestic net revenue continued to grow faster year over year than most other players, even as its growth rate continued to decline as the company’s major market, search advertising, continues to mature.

“What happens is that the current economic crisis puts pressure on advertisers to save money and find more effective marketing channels,” said Karsten Weide, program director, Digital Marketplace and New Media at IDC. “Effectively, the crisis accelerates the shift of advertising budgets from traditional media into new media.”

Even though IDC said it anticipates that the threat of a potential recession will decrease ad expenditure across all media by as much as 7% in 2008, quarterly online advertising growth will still increase at rates around the 15-20% range in 2008. IDC forecasts that U.S. Internet advertising spending will more than double in five years.

The Internet will bump up from number 5 to the number 2 medium in 5 years. It will be second only to direct marketing claims the research. Video advertising will be the main disruptor of online advertising over the next five years by attracting the most ne marketing dollars. Its revenue will grow sevenfold from $0.5 billion in 2007 to $3.8 billion in 2012 at a CAGR of 49.4%.

“The size of the online video audience as well as the time it spends watching video is sure to increase as broadband access penetration increases, connections become faster, and as more premium content is available,” said Karsten Weide, program director, Digital Media and Entertainment. “What will also drive this trend is that consumers are starting to realize that, as opposed to TV, Internet video lets them watch what they want, when they want, and increasingly also where they want.”

IDC’s study of online behavior found that people spend about half of their weekly media time budget online: 32.7 hours on average. In contrast, consumers spend about 16.4 hours watching TV and a paltry 3.9 hours reading newspapers and magazines.

That’s a serious spike: just two years ago, JupiterResearch found that Internet users spent about 14 hours online, about the same time they spent watching TV. Savvy advertisers and marketers take heed!

One caveat: people are creatures of habit. The data shows that consumers tend to use the media they grew up with. The older the respondent, the more time they spent in front of the small screen or with papers.

So what do typical consumers do online anyway? Search engines are the most popular destinations (84%), while mapping services (83%), personal research (77%) and emailing (76%) are also strong favorites.

Capitalizing on consumer’s online habits is key. “The Internet is the most heavily used medium in the United States. Users spend almost twice as much time using the Internet as they do watching TV,” said Karsten Weide, IDC’s program director, Digital Media and Entertainment. “And we will see marketers move money out of broadcast TV and into Internet video advertising.”

IDC provides market intelligence, advisory services and event for technology, telecommunications and consumer technology markets.

Internet ad spending surged in 2007, with revenue growing 27% year over year to $25.5 billion, the IDC reports Monday in its quarterly wrap-up. Expenditures in the fourth quarter of 2007 grew by almost 28% to $7.3 billion, compared to the same quarter the year before.

And all signs point to a continuing upswing: eMarketer predicts that spending on search engine advertising alone will rise from $8.6 billion in 2007 to $16.6 billion in 2011.

But the news wasn’t good for everyone. Google’s share of the market declined for the first time in two years, the IDC says. Its net U.S. online advertising market share shrank by 0.5 percentage points to 23.7% last quarter compared the third quarter of 2007. While the search giant’s ad sales grew by a little more than 40% in the fourth quarter of 2007, its year-on-year growth rate in the previous quarter weighed in at about 50%.

Some market watchers say that trend could continue too – if a certain rumored merger occurs.

“If a merger between Microsoft’s new media business and Yahoo! would come to pass, the combined entity would have a net U.S. advertising market share of about 17% based on our 4Q07 data,” says Karsten Weide, program director for IDC’s Digital Marketplace: Media and Entertainment service. “It would not quite bring Microsoft-Yahoo! to where Google is in online advertising in the U. S., but it would give them a much better fighting chance than if they went it alone.”

But dreams of a leveled playing field will have to be at least temporarily shelved. Yahoo’s board rejected Microsoft’s bid on Monday, saying it was too low.

The brainchild of Sergey Brin and Larry Page can’t rest easy in 2008, however, as they celebrate the 10th anniversary of Google’s incorporation. Google is branching out with various side projects, potentially including a television offering and an online service giving people access to their own medical information.

Goal No. 1, though, is fending off a variety of potential challenges that might disrupt its dominant position in the online advertising marketplace, says Karsten Weide, director of IDC’s digital media and entertainment program.

“Google’s top priority is to diversify their revenue sources,” Weide says, explaining that because Google relies on search ads for 99.1% of its revenue, the company is vulnerable to disruptions in the online advertising market.

The most immediate challenge here is advertising contained within online videos — that is, online commercials, according to Weide. Google’s acquisition of YouTube was designed to shore up a weakness in video advertising, but this is an emerging market that is still in flux, and billions of dollars will go to the eventual winner, he says.

Advertising on YouTube is scarce because the site isn’t “brand-safe” — advertisers stay away out of fear that content is illicit or stolen, Weide says. Pirated content also makes commercial content providers wary of YouTube. A resolution to this power struggle “will perhaps come this year [2008], but it may take a while.”

If it takes too long, new distribution avenues like Hulu, a video-on-demand site currently in beta, could benefit at Google’s expense.

Jon Brodkin is a writer for Network World

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