Not everyone may like former internet and securities analyst Henry Blodget but generally I find his blog refreshingly honest and independent. Recently Blodget contemplated how long Google’s phenomenal growth could last. After all, it is easier to get to the top than to stay there and Yahoo and Microsoft are showing an increasingly dogged determination to reclaim some of the market share they have lost to Google over the past years.

Despite heavy investments in other areas, Google still makes almost all of its revenue from those familiar text ads and Blodget questioned how much longer it could maintain its stellar growth as advertisers are faced with increasing CPCs and decreasing marginal returns. Both Yahoo and MSN on the other hand have still relatively low CPCs so advertiser are incentivised to migrate some of their budgets to these search engines. But the response from search engine marketers was almost unanimous: despite lower margins, Google is able to deliver traffic volumes unmatched by its rivals and therefore it is simply not an option not to advertise on Google. Our experience is similar: outside the US, Google is almost the only search engine that matters, apart from a few local companies such as Baidu in China.

In the US, Yahoo and to a lesser extent MSN can deliver additional volume to mature campaigns but Google is generally the first choice when it comes to launching campaigns. In addition to volume, Google Adwords offers ease of use. This is not to be underestimated when managing many campaigns of various sizes. Yahoo and MSN completely rebuilt their advertising system in the past year but I can’t help feeling they somewhat missed the opportunity to offer simplicity. Just compare how long it takes to have a campaign up and running on Adwords vs. Panama (or -sigh- MSN).

All this admin is unnecessary overhead which adds to the hidden cost of running a campaign and it is something which Blodget didn’t incorporate in his argument. Google Adwords is not perfect and we regularly see peculiar behaviour that indicates that behind the scenes Google engineers do make mistakes. But the company is serious about search (and even more about search advertising) and seems far more proactive and aggressive defending its market dominance that its rivals appear attacking it. So although I won’t get into a discussion about whether Google’s market valuation is justified, I do believe that the company has not lost the drive and focus that made it thefifth biggest company in the US.