Though Wall Street is gushing over Google for the time being, its less sexy competitor Yahoo! should not be counted out of the search-engine wars.

Google’s stock closed at a record high $205.96 yesterday – an increase of 7.33% or $14.06 – after trading as high as $216.80 in the morning on the Nasdaq exchange. The stock rose on news released after the market closed Tuesday that Google’s fourth-quarter profit rose more than sevenfold to $204 million from the same period the previous year.

The world’s largest search engine company’s share price topped its previous peak on January 19 of $205.30 since its $1.7 billion IPO in mid-August, which was priced at $85 after the company couldn’t persuade enough investors to pay its original target range of $108 to $135.

Meanwhile, shares of Yahoo rose 79 cents yesterday to close at $35.54 in Nasdaq trading, up from a 52-week low of $20.57 last March.

Yahoo earlier this month reported a fourth-quarter profit of $373 million on revenue of $1.08 billion. The bulk of its fourth-quarter revenue, $911 million, was from advertisers.

Both companies are riding on a wave of marketers willing to pay ever-increasing prices to have their links returned next to free results when people use certain keywords to search for items and services online. Google also has a program called AdSense where sponsored links are delivered on Web sites according to page content – a person may see links to home-loan offers near an article on real estate on WashingtonPost.com, for example.

Advertisers love these programs – they pay only if someone clicks on their ad, and only after the person clicking has already shown an interest in their product or a related topic.

With Mountain View, Calif.-based Google’s domestic ad revenue in 2004 at $2.1 billion, compared to $9.5 billion spent on Internet advertising nationally, Google’s ad revenue accounts for 22% of all ad revenue in America, according to online research firm eMarketer of New York. “That just shows the dominance of Google,” said an eMarketer senior analyst, David Hallerman.

The figure also shows the dominance of paid search advertising – a form of advertising that is little understood outside of online marketing circles. Though eMarketer estimates paid search to account for 40% of all online ad revenue, 62% of Web searchers are unaware of the distinction between sponsored and free results, according to the Pew Internet and American Life Project.

Moreover, paid search advertising is expected to grow 22.5% in 2005 to $4.72 billion from $3.85 billion in 2004, according to eMarketer.

Google is easily the king of the paid search market with a 54% share, compared to Yahoo with its one-third share, according to eMarketer.

However, Sunnyvale, Calif.-based Yahoo has at least one advantage over Google, say experts: sponsorship packages. “They have a more well-rounded offering because they’ve got e-mail, they’ve got display ads, they’ve got search,” said the executive vice president of New York and La Jolla, Calif.-based online marketing agency SiteLab, Dana Todd. For example, she said, her client TurboTax has purchased space in Yahoo’s finance section, its tax center, some run-of-site banners, and e-mail to members.

“They can offer sponsorship packages that Google can’t touch,” she said.

Also, Yahoo is poised to take advantage of another area of growth in online advertising that Google currently is not: rich media. Advertisers’ use of so-called rich media, or ads with movement and sound, is expected to grow 35% this year to $1.1 billion, compared to $80 million last year, according to eMarketer.

“Google and Yahoo are quite different animals,” said Ms. Todd. “Yahoo is a major portal. Some business executives have it set as their home page because that’s where they check their personal e-mail. Google, on the other hand, is a lean mean search machine.”

Ms. Todd said that she typically buys advertising for clients from both Google and Yahoo. “It’s always worth testing both,” she said.

However, Google is still no.1 with Web surfers, and its clean, uncluttered design assuredly has something to do with that.

Moreover, with its shares trading at more than $200 each, Google is one acquisition away from any business – display advertising, rich media, even television – that it wants to enter.

Who knows, maybe Google might even want to finance Martha Stewart’s new NBC show, modeled after Donald Trump’s hit, “The Apprentice.” After she’s released from prison in March, her show will pick a $250,000 assistant to help with Martha Stewart Living Omnimedia, NBC said yesterday.