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Last Updated: Thursday, 24 February, 2005, 23:59 GMT
Google and Yahoo see ratings cut
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Google faces increasing competition but has many fans
Shares in search engine companies Google and Yahoo fell in the US on Thursday after RBC Capital Markets cut its ratings on the companies.

New competition also entered the field as AOL, the search engine and email service owned by Time Warner, launched a local search service.

Google shares fell 6%, but recovered to close down 2.6%, or $5.06, at $188.89 on the Nasdaq.

Yahoo dipped 5.6% initially but closed just 2% lower at $31.48 on the Nasdaq.

Advertising retreat

Both Yahoo! and Google have diversified into new product areas

The sell off was spurred by fears the search engines could not charge as much for adverts in the the first quarter.

Prices for advertising were unexpectedly strong in the fourth quarter of 2004 but may have been boosted more by Christmas spending than was realised at the time, say analysts.

Separately, America Online, the email and search engine service, announced it was launching a comprehensive new search service aimed at providing one of the most extensive directories of local information available to help people find information on their local area.

The new service will be integrated with America Online's existing search engine.

Banking ties

RBC has investment banking relationships with both Yahoo and Google, according to Reuters.

Micheal Bee, lead equity strategist at Boyd Watterson Asset Management, said Google and Yahoo "from a fundamental approach seem to be overpriced."

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