Search to grow faster than e-commerce on the web, says research firm

E-commerce may be growing fast on the Internet, but search is growing faster, according to findings of US Bancorp Piper Jaffray Research. The equity research firm says search is the third-largest Internet market after e-commerce and advertising and is expected to be a $7 billion industry internationally by 2007. That represents a compounded annual growth rate of more than 30%

The growth in revenue from search is expected to outstrip the growth in e-commerce over the next 18 to 24 months, according to the firm. “The key driver of growth is the increased popularity of search as the most efficient way to find products and information, and simultaneously the rise of search as the best way for advertisers to find and acquire customers,” says Piper Jaffrey senior analyst Safa Rashtchy.

Leading the pack is Overture Services, which generated $688 million in revenues from search services in 2002; followed by Google, which Piper Jaffray estimates at $294 million; Yahoo Inc. at $140 million, and MSN, with revenues estimated by Piper Jaffray at $138 million.

One of the drivers of search growth in the future will be an expansion of its search scope–-in other words, using Internet search to find things beyond web sites, such as phone numbers, for example. “A much wider adoption of search by offline companies, particularly for local listings, could have significant impact on the growth of search revenues,” says Rashtchy.