In yet another sign that the Internet market is getting very interesting to Wall Street, well-known analyst Imran Khan (pictured here) is jumping from his perch as managing director at J.P. Morgan to become a banker at Credit Suisse, according to sources close to the situation.

In this new role, the high-profile Khan–well known for his reports on digital companies–will be running investment banking for Internet markets, including IPOs and M&A.

Khan, who will leave Morgan in several months, is making a big shift from analyst to banker, designed to give Credit Suisse more credibility in the arena as more Web companies come to market.

He also has a strong focus internationally, especially in China, where there has been huge growth of late.

Khan did not return an email and phone call seeking comment, and Credit Suisse has also not responded.

But one industry veteran noted that Khan had the profile and potential–mixing analysis with banking–to be the next investment star, especially as initial public offerings ramp up again.

“In my mind, Imran is certainly as good as Frank Quattrone, said the person, referring to the well-known Silicon Valley banking legend of Web 1.0, who remains active still in dealmaking. “And even stronger in some ways, because of his international and China domain expertise.”

No big deal, Google said–just a little re-org.

And at first blush, Wall Street seemed to take the company at its word. Eric Schmidt, Larry Page, whatever. A sampling of analyst reactions:

• J.P. Morgan’s Imran Khan: “We think it is important to note that although the titles have changed, the core team remains the same. We think this new team structure makes a lot of sense and could result in faster decision making.”
• Citigroup’s Mark Mahaney: “We view this change as un-dramatic, as Eric Schmidt will still be working closely with Page and Brin…we believe Larry Page has been groomed for the role of CEO, and we don’t expect any dramatic changes to Google’s core strategies.
• Barclays’ Douglas Anmuth: “We don’t actually view it as that material of a change. We still think Google will be run in a similar manner as it is today, and mostly by the same people.”

Investors also seemed to yawn, or at least they seemed to last night: Google stock moved up a little bit after the market closed, but that was it.

Today, though, the story is harder to discern from the GOOG chart, which is one of the reasons you should always be wary when someone tells you with confidence why a stock is moving one way or another.

Watch the huge spike at this morning’s open, and then the steady decline. This was taken shortly before noon, New York time:

Again, don’t make too much of a stock’s movement on any given day. But you do have to wonder if any of this reflects a reassessment of the move.

It is definitely true that Larry Page was deeply involved in every major decision Google grappled with, and it’s undeniable that the company relies on a second tier of executives, like CFO Patrick Pichette and sales boss Nikesh Arora, to make the trains run on time. So, easy enough to argue that there’s no real change.

Still, now we’re seeing reports reminding us that the weird power-sharing arrangement between Schmidt, Page and co-founder Sergey Brin was, in fact, a weird arrangement. And that it didn’t always work smoothly. And that the three men may not have been on the same page about a variety of things. Which means that the company may in fact behave differently under Page’s guidance.

Which again, isn’t necessarily a bad thing. But it could be a new thing–and Wall Street never quite knows what to make of that.

Or (and this is the cable guys’ favorite answer) is it something that people like to talk about, but won’t really do?

Today’s installment comes from JP Morgan’s Imran Khan, whose 2011 forecast is chock-full of interesting data (see these amazing Facebook numbers – and plan on getting at least one more of these today or tomorrow). Khan believes that cord-cutting – or at the very least, a wave of “over-the-top” video, delivered by the Web instead of cable – is real. “A consumer-driven Tsunami”, he calls it.

And this chart helps explain why, at least at first glance:

Ominously, Khan notes that the 28 percent of people who say they’d consider cutting the cord includes the rare 16 percent of people who don’t hate their cable company. In his words, they’re “currently satisfied with pay TV lineup & pricing”. (Who are these people? Have you met one of them? Do they have access to awesome mood-altering drugs?)

That seems terrifying for Comcast and Time Warner Cable. But bear in mind that these are people who say they’d consider cutting the cord. Which is a whole lot different than taking out the shears. I can think of lots of things I would consider, but I tend to do very few of them.

I’m also not sure that people who say they’d consider cutting the cord have really thought through what that means. The idea that you can drop cable and get all the video you want for a lot less sounds great, but it’s not true, at least for now: There’s a lot to watch on Hulu, Netflix, etc but it’s not a 1-1 replacement for cable.

Khan gets at this, a bit, when he notes that 63 percent of his survey’s possible cord-cutters would be up for it even if they’d lose access to live TV sports (ie, no Monday Night Football, etc).

That’s a lot, but that also means that Khan’s 28 percent figure is a little high — that’s the number of people who’d like to do something you can’t really do yet.

Still, worth noting that a different survey question does back up the fears that the cable guys have about Netflix and its Web streaming service — it’s a gateway drug to (possible) cord-cutting!

Facebook is really, really big. It doesn’t have quite the reach of Google and Yahoo yet. But it’s still growing–fast–getting very close:

Meanwhile Facebook has already eclipsed Yahoo in terms of total time spent on the Web:

And Facebook boasts a loyal user base. Half of them come to the site at least once a day:

And the rest of the Web is growing more dependent on Facebook. Check out the increase in referral traffic from the social network to the New York Times, Amazon and eBay. Google’s still much more important, but again, Facebook is growing fast, and will grow faster if its outreach program to big media works:

J.P. Morgan’s Imran Khan puts that in context via this helpful chart. Remember that e-book sales didn’t really exist until the late fall of 2007, when Amazon introduced the first (really mugly) Kindle. And recall that Apple only entered the market in April of this year. So you can see where this is going (click to enlarge):

The caveat: The book market just isn’t that big. U.S. e-book sales to date are just $263 million, which means people have spent more money going to see “Clash of the Titans” and “The Expendables” this year than they have on digital ink.

Oooh! Great opportunity to show a clip from the best Elmore Leonard movie adaptation, hands down:

As Kara Swisher has reported, Google (GOOG) and MySpace owner News Corp. (NWS) are close to a “realistic” search deal to replace the famous three-year, $900 million pact signed during the Web 2.0 boom. The old deal expired this summer, and the two companies have been negotiating a replacement while working through a couple of one-month extensions.

News Corp., which also owns this Web site, doesn’t have much leverage here. Its once-hot social network has long been eclipsed by Facebook, and Microsoft (MSFT) doesn’t seem inclined to make a competitive bid for the MySpace business.

Translation: The new deal should save Google $200 million in traffic acquisition costs, Khan says. And he figures that those savings will show up as soon Google’s Q3 results, due out next week: He’s boosted his net revenue estimate to $5.33 billion, up from $5.32 billion.

Conclusions: It’s really cool! And also, it’s totally, definitely, going to kill someone!

Exactly who that will be is unclear: Maybe it will be Microsoft’s (MSFT) Bing! Maybe it will be Twitter, which is supposed to be “real time,” too! Or maybe it will be the dark arts of search-engine optimization!

Maybe! Or maybe it will be more like Apple’s (AAPL) Ping, which was declared a MySpace Music killer before Steve Jobs finished presenting it last week. Now that people have actually used Ping, though, it seems less homicidal and more benign/inept.

In any case, one thing Google Instant won’t do is make any significant impact on Google’s P&L. So says J.P. Morgan’s (JPM) Imran Khan, in a note he just published (almost instantly!). His big takeaways:

It won’t make Google (GOOG)  any more money, in the near-term:

We think this new product will have little to no impact on monetization rates. We see this product as an improvement to user functionality and think that its impact on advertisers will be limited. All of the ads typically associated with the suggested search appear as normal as the query is being entered. No changes have been made to serving or ranking. Although the constant updates to the results page may result in more ads served as a person types a query, this should only impact CTRs not the number of clicks as a user will not likely click on an ad until the appropriate results appear.

But it won’t cost Google anything, either:

Management expects the impact on costs to be in line with their existing search cost growth curve. Engineers adjusted the product to have as minimal an impact on servers and data centers as possible. Management expects the impact to be in line with the existing search cost growth curve.

But! If people like it (it really is cool), and that prompts them to search more, then that’s a good thing for Google, long-term.

OK! Back to the killing fields!

• TWX reported revenue of $6.38B, vs. our estimate of $6.06B, up 7.7% Y/Y. Adjusted operating income of $1.20B was $90M better than our estimate. We note that the beat came from cable networks, which we see as higher quality than film.
• Filmed Entertainment revenue was $2.52B, ahead of our estimate of $2.26B, up 7.8% Y/Y. Segment operating income was $173M, while we estimated $171M.
• Cable Networks revenue was $3.17B, and Adjusted Operating Income was $981M, while we estimated at $931M.
• Publishing revenue came in at $919M, in line with our estimate, up 0.4% Y/Y. Segment Adjusted Operating Income was $153M, vs. our est. of $142M.
• Reported diluted EPS ex-items of $0.50, vs. our estimate of $0.44.
• On the call we will be looking for commentary on the advertising market recovery and cable networks cost trends as well as for an update on capital allocation.

EBay (EBAY) earned 40 cents a share in the second quarter, adjusted, on revenue that rose six percent to $2.22 billion. Analysts were expecting earnings of 38 cents a share on revenue of $2.16 billion. Good news since according to JP Morgan analyst Imran Khan, any “number below $2.15B would be a disappointment, while anything above $2.2B would be a positive.”

Once again, it is PayPal that seems to be driving eBay’s business. In a statement, the company said PayPal delivered a “record” second-quarter performance, adding a million new accounts each month during the quarter.

“We delivered strong second-quarter results, demonstrating the global strength and increasing diversity of our business,” said CEO John Donahoe. “PayPal is strong and getting stronger, building a robust and innovative global footprint serving all of e-commerce. And our eBay turnaround remains on track, with strong performance in Europe, significant changes in the U.S. and continued improvements to the buying and selling experience. We continue to focus on delivering strong financial results, managing a healthy balance sheet and making the necessary investments to compete, win and satisfy our customers.”

Looking ahead to the third quarter, eBay said it expects earnings of 26 cents to 28 cents a share on revenues of $2.13 billion to $2.18 billion.

Shares of the company, which closed down at the end of regular trading, are up more than three percent after hours.

Another month, another search data report from comScore.

In the June episode, both Yahoo (YHOO) and Microsoft’s (MSFT) Bing gained a weensy bit of market share, while Google (GOOG) gave some up.

But a caveat all around: There is still a lot of uncertainty in the results because of issues involving extra search query-clicks being generated via questionable techniques around contextual search, which comScore (SCOR) said it will eventually fix.

According to analyst Imran Khan of J.P. Morgan:

Without adjustments, Google domestic core search market share was 62.6% in June, down from 63.7% in May. Google domestic core search volume growth of 12.7% Y/Y in June was up from May’s 9.1% growth.

Unadjusted, Yahoo! domestic core search market share increased to 18.9% in June from 18.3% in May. Yahoo! June core search volume was up 13% Y/Y, an improvement from May’s 1% growth. We believe the company is working to address its search market share as outlined at its recent Analyst Day–though the majority of the near-term uplift is coming from efforts to ensure third-party measurement is correctly crediting Yahoo! for contextual searches.

Unadjusted, Microsoft sites domestic core search market share increased to 12.7% in June, from 12.1% in May. Microsoft grew June core search volume by 77% Y/Y, accelerating from 68% growth in May.

Getting an accurate read on the tides of search market share these days is no easy feat given the interface changes being rolled out by the major players.

Consider comScore’s May search market report (see tables above; click to enlarge), which shows Microsoft’s Bing and Yahoo gaining share, ostensibly at Google’s expense. For the month, Yahoo gained 60 basis points for a share of 18.3 percent, and Bing 30 points for a share of 12.1 percent. Meanwhile, Google’s (GOOG) share declined 70 basis points to 63.7 percent.

While those numbers seem straightforward enough, they really aren’t, given some of the navigational ploys Yahoo (YHOO) and Microsoft (MSFT) have been using to boost their numbers. Slideshows and contextual search links have helped raise the share of both companies, but they need to be backed out of the data to get an accurate view of the sector, as J.P. Morgan (JPM) analyst Imran Khan explains.

“User interface changes continue to cloud the picture,” Khan said in a note to clients. “Google, Yahoo! and [Bing] all made notable changes in April and May, according to comScore. As such, numbers may not be directly comparable to past months. On a reported basis, Google lost ~70 bps of search share in May vs. April, while Yahoo! was the biggest gainer, up ~50 bps. Excluding the impact of all adjustments, Google gained ~30 bps of share, Yahoo! was down ~25 bps and Microsoft was flat.”

In other words, the numbers here do lie and will continue to do so until measurement outfits like comScore (SCOR) account for context-driven searches and slideshows. ComScore plans to do just that.

“[The] continued evolution of search and emerging innovations in how it is used to enhance user experience, calls for a thoughtful review of how we classify various types of searches, count them and report them,” Cameron Meierhoefer, comScore’s executive VP of analytics, wrote in a blog post released along with the company’s latest search stats.

“We want to ensure that we provide comprehensive and flexible measurement that meets the needs of the various constituencies in the digital marketplace,” Meierhoefer added. “As our thinking evolves, we will include relevant stakeholders in the discussion and clearly communicate our thinking and rationale to the marketplace.”

The timeline? “While we will maintain the current method through the end of the second quarter to avoid reporting disruptions, we will aim to implement proposed revisions in the third quarter, ideally starting with the release of July data in the first half of August.”

So they’ll be heartened by this table, from a survey of ad buyers conducted by J.P. Morgan’s Imran Khan. It shows display ads picking up 1.5 percent of ad budgets this year (click to enlarge):

Note that comScore (SCOR) says display ad volume (but not overall revenue) jumped 15 percent last quarter, and it’s tempting to believe that this is finally the year when Web advertising really moves beyond search advertising.

Meanwhile, the people who are feeling most confident about their near-term future are the guys selling TV advertising. Broadcast TV is still losing share, but cable TV is up. And most buyers–74 percent–who do pay for spots say they’re spending more than last year.

A lot of changes in interfaces and some tricky techniques at the three main search engines–Google, Yahoo and Microsoft–gave only a fuzzy picture of the market share numbers for April.

While Google (GOOG) sharpened its look with a handsome new interface, Microsoft (MSFT) and Yahoo (YHOO) beefed up their search offerings with content, including some traffic-generating slideshows.

As a result, comparisons are harder, so overall, Wall Street analysts seem to think it’s a wash for all until new data on real search growth tied to real revenue in the months ahead come in from comScore (SCOR).

For example, without taking into account the changes, Google share was down to 64.4 percent in April from 65.1 percent in March, but it gained slightly when adjustments were excluded.

Yahoo was up, unadjusted, to 17.7 percent from 16.9 percent, but down slightly if adjusted. Microsoft was the same–up to 11.8 percent from 11.7 percent, but down if adjusted.

A Yahoo spokeswoman said in a statement on the report:

“We continue to invest in our search experience with innovations that help people easily find information, which in turn drives greater engagement. Increases of Yahoo!’s search share last month stemming from related searches we display in properties like Yahoo! News, are simply bringing Yahoo! to parity with the way that comScore counts searches across other Internet companies. Including these searches improves the accuracy of reported market share across the industry in April. As always, we encourage you to focus on long-term trends in third-party data rather than short-term swings.”

Confused? So is BoomTown, so enjoy J.P. Morgan’s Imran Khan on the search market share trends in his report here:

c.do

Yahoo will announce its first-quarter earnings after the markets close today and have a call with Wall Street analysts at 2 pm PT.

BoomTown will be liveblogging the proceedings, of course.

Until then, here are preview reports about Yahoo (YHOO) from a pair of sharp analysts: Imran Khan of J.P. Morgan (JPM) and Mark Mahaney of Citigroup (C).

Overall take: Recovery mode for the Internet giant, due to an upswing in display advertising online, which has been a good thing for the stock. It has risen smartly to prices above $18 in recent weeks, closing yesterday at $18.39.

Khan:

Yahoo Inc: 1Q’10 Earnings Preview: Expect Display Ad Recovery to Continue

Overweight

We are modeling Yahoo! 1Q revenue to be flat on a Y/Y basis (down 8% Q/Q) to $1.16B, slightly below consensus of $1.17B. We expect Yahoo! to achieve 1Q pro forma EPS of $0.14 vs. consensus of $0.13. Given macro-economic improvements as well as company specific changes, we feel that there may be upside to guidance of gross revenue of $1.58B to $1.68B and our estimate of $1.63B.

Display advertising should recover. We are modeling 7% Y/Y growth (down 21% Q/Q) on O&O display revenue. This would be an acceleration from last quarter’s down 1% Y/Y performance. We feel confident in our estimate and think there could potentially be upside as the ad environment improved throughout the quarter and we see guaranteed inventory showing the largest improvement. We note that page views on the homepage, Yahoo! sports, and Yahoo! finance were up 5% Y/Y, 24% Y/Y, and 2% Y/Y during the quarter, according to comScore data.

Search market share shows signs of stabilization. However, despite this positive data point in March, we continue to expect 1Q search revenue growth to underperform Google due to modest market share loss earlier in the quarter, and as advertisers are moving ad dollars from the Yahoo! Platform in anticipation of the migration to the Microsoft Platform. We are modeling 1Q O&O search revenue to decline 10% Y/Y (3% sequentially), as comScore data suggests US queries declined 10% Y/Y.

Margins should continue to improve. We feel good about our EBITDA estimate of $370M, roughly in-line with consensus of $372M. Our EBITDA margin est. of 32.1% implies a 370 bp Y/Y decline as we expect increased marketing spend. However, we think there may be upside to this number.

Key things to look for on the call. We are hoping to attain more insight into Microsoft synergies, the ramp-down of search related expenditures and the outlook on search RPS.

Reiterating our OW rating. Yahoo! trades at 6x our F’10 EV/EBITDA vs. the large cap peer group ave. of 12x. We think this discount is unjustified and reiterate our OW rating and $21 price target.

Mahaney:

From: “Mahaney, Mark “
Date: Mon, 19 Apr 2010 11:18:10 -0400
To: Undisclosed recipients
Subject: Flash: YHOO: YHOO Q1:10 “Cheat Sheet”

Yahoo! is expected to report Q1 earnings on April 20th, after the close. For the March quarter, we are looking for Gross Revenue of $1.63B, Net Revenue of $1.16B, EBIT of $100MM and GAAP EPS of $0.09 vs. consensus estimates of Gross Revenue of approximately $1.63B, Net Revenue of $1.17B, EBIT of $108MM, and GAAP EPS of $0.09. Based on intra-quarter channel checks and our model sensitivity work, we believe Street Q1 estimates are reasonable, with no material signs of upwards or downwards variance. We do note that YHOO will give additional detail on one-time payments and cost savings from the YHOO-MSFT Search deal, which received regulatory approval in Q1.

Read-Thru From Google’s Q1 Results–We believe GOOG’s Q1 results provided a modestly positive read-thru for YHOO’s Q1 EPS results. Google’s U.S. revenue growth showed Y/Y acceleration (even after we adjusted for its Nexus One sales), and Google noted that it saw strength in every vertical, including Retail, Travel, Entertainment, Finance and CPG. Google also noted that Q1 showed a resurgence among large advertisers. We note that Yahoo!’s business is heavily weighted towards the U.S., and that its key verticals include Finance, CPG, Autos, and Entertainment. Finally, YHOO has a strong focus on large, branded advertisers, so we believe Google’s Q1 results should provide a positive outlook for YHOO Q1.

Our YHOO Q1 “Cheat Sheet” [see embedded below]–On page 2, we provide a one-page grid of what we would view as Positive, Neutral & Negative results for YHOO on Key Q1 P&L Items, Key Q1 Underlying Metrics, and Q2 Guidance. This Cheat Sheet will hopefully provide a guide to interpreting YHOO’s results.

We reiterate our Buy & $22 PT–Our Long Thesis: 1) YHOO will participate in an Ad recovery that is already showing real traction on the ‘Net; 2) New management focus significantly increases odds of sustained operating margin expansion; 3) YHOO has highly attractive Asian Internet portfolio & 4) @ 6X ’10 EV/EBITDA, YHOO shares don’t fully reflect 1, 2, 3… We view YHOO as the Large Cap Internet Turnaround/Value Play.

Link to our full note: https://www.citigroupgeo.com/pdf/SNA54039.pdf

SNA54039

And that will still be a very good business for Amazon (AMZN), Khan says. He figures that a smaller chunk of a much larger market will eventually generate $1 billion in incremental revenue for the e-commerce giant.

You can see his math and assumptions here (click to enlarge):

Khan’s point is part of a larger note making the bull case for Amazon shares, and he argues that his assumptions for the retailer’s e-book business are deliberately conservative.

That sounds right to me, though I’d add one caveat. Khan assumes that e-books will follow the path of music sales, which quickly moved over to digital following the introduction of mobile devices–specifically, Apple’s (AAPL) iPod. But there are several big differences between books and music, and the biggest one is that you don’t need a special device if you want to travel with books–they’re already mobile.

I know plenty of people who swear by their Kindles and tell me that they’re reading more than ever since they got the gadgets. And maybe they’re representative of the larger population. But if it turns out they’re merely very enthusiastic early adopters, we’ll need to rethink some of this math.

The move is primarily aimed at making it easier for international advertisers to purchase Facebook Ads, but it will also give Facebook users another option for buying Facebook Credits, which can then be used to purchase virtual wares in the site’s gift store.

“We want to give the people who use Facebook, as well as advertisers and developers, a fast and trusted way to pay across our service,” Dan Levy, director of payment operations at Facebook, said in a press release. “As our business has grown, offering local methods of payment has become increasingly important for advertisers who want to buy Facebook Ads. Teaming with PayPal, a global leader in online payments, makes this possible.”

Another thing it will make possible: Increased revenue. As J.P. Morgan analyst Imran Khan noted in a research bulletin issued after the announcement, “More than half of US internet users now use Facebook, and globally the site represents ~5% of all time spent online. Additionally, we think social games generated more than $500M in revenue in F’09, and the sales of virtual goods and premium services are a key part of the revenue model for such games–one which we think has been constrained by the shortage of straightforward payment options.”

According to comScore’s (SCOR) January 2010 core search volume and market share data for the U.S.–as reported by J.P. Morgan’s Imran Khan, Bing’s share of the search market rose to 11.3 percent from 10.7 percent in December. Meanwhile, Google’s share fell to 65.4 percent, from 65.7 percent in December and Yahoo’s to 17 percent, from 17.3 percent. Not significant declines by any means (though Yahoo is down 21 percent year-over-year), but nice little breadcrumbs for Bing to snap up just the same.

Which is not to say that Microsoft (MSFT) will be able to parlay its advance into more meaningful gains. Certainly, it will continue to be dwarfed by Google (GOOG) for the foreseeable future. But perhaps not by Yahoo (YHOO), particularly given the discrepancies in their core search volume. In January, Bing saw its core search volume increase by 49.6 percent, up slightly from 49.4 percent in December. Meanwhile, Yahoo’s core search volume decreased by 8.9 percent, considerably more than the 1.9 percent decline it suffered in December.

Depends who you ask.

Last night JP Morgan (JPM) analyst Imran Khan estimated that Google (GOOG) might give up $600 million in 2010 revenue if it bails. Today, Citigroup’s (C) Mark Mahaney ballparks the number in the $300 million to $350 million range.

Both analysts agree with Google’s description of the revenue loss as “immaterial,” though.

For now, that is. The real worry, of course, is that if Google gives up on China now, it will forgo a huge business opportunity in the future.

So the real question–and one we won’t get an answer to for a bit: Does Google think it is still negotiating with China or has it already written off the world’s biggest population of Internet users?

So says JP Morgan’s (JPM) Imran Khan. He predicts that Jeff Zucker’s screwup is good news for Jeff Bewkes since Time Warner makes a lot of “scripted programming,” and that’s what NBC will need to replace Leno at 10 pm.

The whole point of moving Leno to 10 pm, recall, was to save money on “scripted programming”–what you and I call “shows that aren’t reality shows.”

But it’s not as if NBC stopped running scripted shows altogether, and at max, the network is going to need an additional five hours a week. Khan says this will represent “incremental spending” for Time Warner (TWX), but it’s not as if NBC’s pressure to save on programming costs is going to go away. And even if the network buys all of five of those hours from Time Warner, it’s hard to see how that does much for a company that generated revenue of $6.3 billion last quarter (not counting AOL).

Khan also thinks the same logic means bad news for Disney (DIS) and News Corp.’s (NWS) Fox because increased demand for nonreality shows “could result in higher talent and production costs.”

Again, this seems like a stretch: It seems like the lesson to draw from all this isn’t that expensive programming is good, but that bad programming is bad.

And as ad dollars inevitably leach out from TV to the Web, the pressure on all the networks will be to keep their viewers’ eyeballs while spending less on content. The real winners will be the ones who figure out how to make good stuff cheaply.

But here’s one very important priority: Reversing the direction of this chart. Via JP Morgan’s Imran Khan, it tracks the amount of money the company has been able to generate from every 1,000 page views:

As Khan notes, you can pin a lot of AOL’s (AOL) ad slump on the previous regime’s decision to sell much of the company’s inventory through its “Platform A” ad network, which stressed volume over price. That is, the AOL sales team was rewarded for selling as much as it could, no matter how much money it got for the stuff.

Armstrong’s solution sounds simple, and it’s one that other big Web players, like CBS (CBS) and Yahoo (YHOO) are trying to do as well: Sell less stuff, at higher prices. It won’t be that easy, of course.

Armstrong’s task may be even harder than that of his peers because AOL’s salesforce, once one of the top shops on the Web, has been in free fall for several years. It’s not a coincidence that Armstrong is a career sales guy, but the sotto voce criticism of his tenure at Google (GOOG) is that he never really needed to sell anything because Google’s ad product sells itself.

That’s a gross simplification, without question. But the best way for Armstrong to prove his critics wrong is to turn that chart around.

“Microsoft eats, sleeps and drinks search,” said one Yahoo source to me this week. “And we just don’t.”

That was one very stark way of explaining why Yahoo, the No. 2 search player, continues to lose market share in the lucrative online arena, even as Microsoft’s Bing service has been slowly gaining.

The latest proof of this came this week from a comScore (SCOR) report that showed a decline of 0.5 percent, to 17.5 percent, for Yahoo (YHOO) in November, even as Microsoft (MSFT) saw a gain from 9.9 percent to 10.3 percent, and Google (GOOG) had a slight uptick, from 65.4 percent to 65.6 percent.

Yahoo’s share is the lowest it has seen and part of a nearly year-long decline in search for the Silicon Valley Internet giant.

That hurts, according to a variety of internal sources at Yahoo, as well as analysts, since each point of lost share represents $100 million to $150 million in revenue.

“We estimate that every one percent search market share is worth approximately $150 million,” noted J.P. Morgan analyst Imran Khan in an email. “However, it’s a blended number.”

What Khan means is that Yahoo’s revenue per search is a lot lower than that generated by Google. And–since Yahoo has a much lower market share–the average is higher.

Still, no one at Yahoo wants to watch search share seep away.

So, not surprisingly, a spokeswoman for the Internet giant–echoing sentiments of CEO Carol Bartz since she signed the search and online advertising pact with Microsoft earlier this year–said Yahoo is committed to excelling in search, especially in search experience.

The spokeswoman also maintained that Yahoo’s share will change for the better as soon as a series of recent updates to Yahoo search–and as increased “infusion” of search throughout site, such as in email–kicks in.

In addition, she noted that Yahoo’s $100 million “It’s Y!ou” marketing campaign is about to turn its attention to the site’s “hero products,” including search.

Since that is still to come and because many of the other changes “were put into place just in September,” she said, improvements will be apparent in the months ahead and not now.

Lastly, the spokeswoman added, some of the declines are related to the inevitable impact of Yahoo losing “non-economic” toolbar and affiliate distribution deals to Microsoft and Google.

Before the comScore figures came out, in fact, Bartz underscored this particular point at an investor conference last week, and Khan also noted it in a recent report.

“We are concerned by this [search decline] trend, but we think some of the market share loss is associated with the discontinuation of tool bar and affiliate deals,” he wrote. “We believe that many of these deals were uneconomical and were created solely to expand its market share. Thus, we think this market share loss will have a much lower impact on profitability than many investors fear.”

Maybe so, but Bing’s slow and steady gains since the new service was launched this summer is still not a plus for Yahoo.

And while those gains are due in part to those pricey distribution deals, they have also been boosted by Microsoft’s own $100 million Bing marketing campaign and an increasingly hopped-up innovation war with Google.

Yahoo, for the most part, has been missing in action in that loud battle, although the company has indeed released a series of new features, including recent integration with Twitter and an upcoming one with Facebook, to increase more real-time search results.

But both Google and Microsoft have done similar deals and continue to update search on a much speedier schedule.

What this ultimately means to the pending MicroHoo partnership will be interesting to watch, since the deal makes more money for Yahoo the higher its share of search.

As part of the agreement–under which Microsoft takes care of the technology for both Yahoo and itself (using, ironically, a lot of former Yahoo techies it has poached)–the software giant will pay Yahoo almost 90 percent of the revenue it gets from search on Yahoo sites.

Less search share, of course, means less revenue, even if Yahoo is not paying for the costs of delivering that search.

On the plus side, Khan and others have noted recently that a recovery in the graphical advertising business could give Yahoo’s stock a boost.

Since Yahoo does eat, sleep and drink display, this might counter its search shortfalls, until, presumably, Yahoo can stop them.

[Bumper sticker courtesy of Zazzle.com.]

A savvy move for Amex, too. Though Revolution competes against entrenched credit-card companies and PayPal, among others, its alternative payment system, which reduces costs for accepting credit cards by up to 75 percent, is quite attractive to merchants who’ve shouldered those costs for so long.

Says JP Morgan analyst Imran Khan: “While it is hard to know precisely what direction AmEx plans to take the Revolution assets, we think the acquisition suggests the company is trying to be more aggressive in the online payments arena. We think PayPal’s existing account base and international footprint have given it a network advantage in the C2C space that is hard to dislodge. On the other hand, we believe significant room exists for market share gains in Online Payments by companies that offer innovative solutions, and this acquisition gives Revolution Money a stronger backer.”

Google (GOOG) claimed 65.4 percent of the domestic search market in October, up from 64.9 percent in September, according to comScore. Meanwhile, Microsoft’s (MSFT) share rose to 9.9 percent from 9.4 percent in September. A modest bit of growth for the month, but quite impressive year over year. Search volume was up 30.8 percent from October 2008.

And Yahoo (YHOO)? Well, the company’s search market share slipped to 18 percent in October from 18.8 percent in September. Below, a table showing comScore’s (SCOR) search volume and market share data, via JP Morgan analyst Imran Khan (click to enlarge):

According to the latest data from comScore, which are the most widely regarded by Wall Street, Bing has not lost search market share in the U.S., as some recent reports had suggested.

The September qSearch report, which was released to clients today, shows the Microsoft (MSFT) search service with a 9.4 percent share, compared to 9.3 percent a month earlier.

Dominant search giant Google (GOOG) also saw a slight uptick to almost 65 percent. Yahoo (YHOO), which just began a $100 million marketing campaign, saw share drop a half-point to just under 19 percent.

Both the market shares of Ask and AOL remained constant at almost four percent and three percent, respectively.

The comScore (SCOR) data on Bing counter two earlier reports that showed declines.

Here is J.P. Morgan analyst Imran Khan on the new data, as well as a table from comScore (click on it to make it larger):

Search Market Share Trends: comScore Releases September 2009 Search Data

ComScore released September 2009 qSearch volume and market share data for the US. We note that this is only one data point and is not necessarily predictive of 3Q performance. Following are the data highlights:

* According to the data, total US core search volume increased 17.3% Y/Y in September, a slight decline from 19.2% Y/Y growth in August. The total 3Q Y/Y growth rate was 17.3% vs. 2Q’s 31.1% Y/Y growth.

* Google domestic core search market share was 64.9% in September, up slightly from 64.6% in August. Google grew September core search volume by 20.9% Y/Y, down slightly from 21.6% Y/Y growth in August. Google domestic core search volume growth of 21.1% Y/Y in 3Q, is below 2Q’s 37.7% Y/Y increase.

* Yahoo! domestic core search market share dropped to 18.8% in September from 19.3% in August. Yahoo! grew September core search volume by 9.0% Y/Y, down from 16.8% Y/Y growth in August. Yahoo!’s 3Q domestic core search volume growth of 11.6% Y/Y is below 2Q’s 27.1% Y/Y growth.

* Microsoft domestic core search market share was up at 9.4% in September vs. 9.3% in August. Microsoft grew September core search volume by 30.7% Y/Y, down slightly from 31.9% Y/Y growth in August. Microsoft domestic core search volume for 3Q was up 25.8% Y/Y, above 2Q’s 20.4% Y/Y growth.

* Ask Network domestic core search market share was flat M/M at 3.9%. Ask grew September core search volume by 6.1% Y/Y, down slightly from 6.7% Y/Y growth in August. Ask Network domestic core search volume was up by 4.5% Y/Y in 3Q vs. 15.6% Y/Y growth in 2Q.

* AOL September domestic core search market share was flat M/M at 3.0%. AOL September core search volume declined 13.5% Y/Y, a slight deceleration from August’s 17.6% Y/Y declines. AOL domestic core search volume was down 15.4% Y/Y in 3Q vs. 2Q’s 5.1% Y/Y decline.

Analyst Imran Khan says he talked to 20 ad buyers and planners, who control a collective $1.6 billion in ad spending, and they tell him that they’ll spend more in the second half of 2009 than they did in the first six months. But that’s not useful information, since ad spending is traditionally weighted that way.

More tellingly, Khan’s correspondents tell him they think spending will be “roughly flat to down” in the last six months of 2009, compared to 2008. And as we’ve discussed before, ad spending started plummeting in the second half of 2008. So if it isn’t improving now, that’s unpleasant news.

More pleasant: Things should get better next year:

2010 ad budgets are looking positive. 25% of respondents see upside of 5-9% in 2010 and an additional 25% see upside of 10-14% vs. 2009. Approximately 40% think that ad spend in 2010 will be roughly flat with 2009 levels.

Looking for more concrete data? Wait a week. Earnings season kicks into high gear Thursday, Oct. 15, when Google (GOOG) hands in its Q3 report card; in the following weeks we’ll also get updates from big media players, including Yahoo (YHOO) and Time Warner (TWX).