Google (GOOG) may be caught up in an international spat with China, but in the United States the web giant continues its seemingly unstoppable climb upward in search market share, according December data released by internet research group comScore. Microsoft's (MSFT) Bing search engine saw a slight uptick as well, while Yahoo (YHOO) gave up ground.Bing and Yahoo, both of which have operated in Google's web search shadow for years, are waiting for the Department of Justice to approve a deal that will combine their search ad businesses -- a pact which may represent the last best hope for a truly competitive rival to Google. Approval is expected and could come within the next few weeks.

Google's search engine accounted for 65.7% of Americans' 14.7 billion searches in December, up from 65.6% in November. Microsoft's share was 10.7%, compared with 10.3% in the prior month. Yahoo, meanwhile, saw it share fall to 17.3% from 17.5%. AOL (AOL), the parent company of DailyFinance, saw its market share fall to 2.6% in December, its lowest since comScore began tracking the market.

By contrast, Google's December 2009 search market share was its highest on record. The strong search numbers bode well for Google heading into its earnings report on Thursday after the closing bell.

Google Strong, Boost For Bing

"We believe this data continues to support our positive view of Google headed into 2010, while we remain cautious on neutral-rated Yahoo! and AOL's search share and volume declines," UBS internet analyst Brian Pitz wrote in a note to clients.

But of the three top companies, the report is most encouraging for Microsoft, according to Broadpoint AMTech internet analyst Ben Schachter. The 10.7% market share for its Bing search engine, which the company introduced last summer, is the company's highest search figure since August 2007, suggesting that its heavy marketing effort for Bing is beginning to pay off.

For Yahoo, the December results were "once again, bad," in Schachter's formulation. "There is no getting around the fact that the market share trend for Yahoo is awful and will impact search revenue," the analyst wrote in a note to clients. "With Yahoo's share of total online time and page views dropping meaningfully over the past few months, the company's underlying fundamental usage trends are a growing concern for us," Schachter added ominously.

Microsoft, Yahoo Await Regulatory Approval

Microsoft and Yahoo are waiting for U.S. regulators to approve the deal combining their search advertising operations, which would essentially reduce the number of major players in the U.S. search market from three to two. Under the proposed deal, Yahoo would use Microsoft's search technology to power queries and ads on Yahoo's stable of web sites. The two companies would split the resulting revenue.

U.S. regulators are examining whether the proposed Microsoft-Yahoo tie-up would stifle competition in web search space.

The European Union has set a deadline of February 19th to rule on the proposed deal. The companies hope to begin the partnership this year, and have been lobbying aggressively on Capitol Hill for regulatory approval, which is expected and could come in the next few weeks.

ComScore reported that EBay and Amazon saw searches on their websites increase by 7% and 21%, respectively, as users increased their retail searching during the holiday. Social networking sites, meanwhile, saw search volume drop: Facebook queries dropped 1%, while News Corp's MySpace, saw a 5% decline.

With Google continuing to consume U.S. search market share, federal regulatory approval for Microsoft and Yahoo can't come soon enough for the two companies.


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