Microsoft Search Ad Revenue Estimates Get Major Downgrade; Google Retains 74% U.S. Market Share [Report]

eMarketer has issued a major revision to its predictions for Microsoft’s U.S. search ad revenue. The latest estimates peg Microsoft net search ad revenue at $660 million last year and $890 million this year, down substantially from the previous estimates of $1.41 billion last year and $1.84 billion expected this year.

The downgrade is based on eMarketer’s assessment of Microsoft’s likely traffic acquisition costs (TAC), which appear to be substantially higher than previously estimated. The new revenue projections slice Microsoft’s U.S. market share in half, from 9.3% to just 4.6%, due to the additional costs Microsoft is expected to pay its ad partners.

Yet, even with this revision, Microsoft is expected to grow ad revenues by 34.3 percent.  Microsoft held the fastest growth rate in both 2011 and 2012, and this year it is second only to Amazon, which is expected to grow 46.8% this year.

Google’s overwhelming dominance remains firm. Revenue estimates rose slightly to $14.39 billion this year. The company’s market share is only expected to increase, from 73.8% to nearly 76% by 2015.

Yahoo revenue is predicted to grow slowly, but the company holds its second-place spot in market share behind Google with revenues reaching $1.15 billion this year and growing to nearly $1.5 billion by 2015.

Overall, the U.S. search advertising market is set to hit nearly $19.49 billion this year, up 12.4% over 2012.