Year in review: Searching for dollars

For many Net companies, commercial search was the saving grace of advertising sales in 2003, reminding everyone of the early promise and growth of the online ad industry.

But it also sparked fierce competition among Internet big wheels, foreshadowing greater rivalry and further clashes in 2004, as more advertisers and publishers depend on the efficiency--and riches--of paid-search listings.

Sales from paid search--Web marketing that pairs text ads with keyword-triggered search results--accounted for an estimated $1.6 billion of the $6.3 billion online advertising pie this year, up significantly from 2002. It also helped MSN, Yahoo and others turn profits.

Early in the year, the major Web portals committed to developing search engines to compete with No. 1 search provider Google. Microsoft invested hundreds of millions of dollars to develop a search service that would tie together its various Web sites, applications and dominant PC operating system. In a dramatic industry shakeup, for about $1.7 billion, and started testing its 2002 acquisition, Inktomi. But it has not yet displaced its longtime search partner, Google. Overture, the pioneer of commercial search, "="">Sprinks, in strategic moves to improve its business and outmaneuver rivals.

2003 was a year for experimentation for all the search players. Google and Overture unveiled search analytics technology, and all the major players tested local search services aimed at tapping a $26 billion yellow-pages advertising market for paid search. While much of the promise of local search is still far off, Web providers are expected to continue to strike deals and innovate in this area next year.

Google, Yahoo and many others introduced applications that let users search directly from their browser, while AOL mulled a similar service. Google grabbed at Microsoft's territory by launching software people can use to search the site without launching a browser.

Google was squeezed on a number of fronts because of the growing importance of its search service. Routing changes to its system sparked complaints from both advertisers and publishers; advertisers alleged trademark infringements; and pharmacy trade groups complained about ads for unlicensed drug sellers on Google and . Meanwhile, many companies tried to direct search traffic . And lawsuits"="" data-asset-type="article" data-uuid="0b62ba02-fedd-11e4-bddd-d4ae52e62bcc" data-slug="google-co-founder-no-rush-for-ipo" data-link-text="watch"> intensified in 2003. Financial analysts "="">have a blockbuster IPO in the spring of 2004, with the potential to revive the tech IPO market. Its public offering is expected to value the company in the tens of billions, largely as a reflection of sales from its growing keyword ad business.

Search advances are expected from Microsoft's research department in 2004, and all the search players will be aiming to personalize and improve the relevance of search results. Internet heavyweights will be jockeying to dominate search outside of the browser as well, with likely new software geared to query information databases from the operating system.