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Of the $21.7 billion that US advertisers will spend online in 2007, Google will account for 27.4%, or $5.9 billion in net US revenues – but Yahoo’s share will fall to 16.3%, or $3.5 billion, down from 19.4% in 2005, according to eMarketer, which new online ad spending estimates for the two companies relative to the overall market.

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Although net US revenue growth rates at both Google and Yahoo have declined since 2004, Google’s ad revenues to increase 45% in 2007, while Yahoo’s growth slows to 18%, eMarketer projects – even as the total US internet advertising market expands almost 29% this year.

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The loss in traction at Yahoo has come from competition in paid search and the delay of its Panama search platform, whereas its display ad revenues have remained solid – but with social-network players MySpace and Facebook becoming competitors in their own right, Yahoo’s challenges are mounting, according to eMarketer.

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“At this point, the key question for Yahoo is whether to chase the evermore elusive paid search advertising dollar or to shift its focus even further onto video and display ads for brand marketers,” said David Hallerman, senior analyst at eMarketer.

“At the same time, Google’s spectacular revenue growth remains unbalanced by its reliance on text-link ads. Getting greater acceptance among its advertisers for video and display ads on its network will be one of Google’s greatest challenges this year.”

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