Framingham, Mass.—U.S. Internet ad revenue reached $25.5 billion last year, up 27% over 2006, according to a new report by IDC.

For the fourth quarter, U.S. Internet ad spending increased 28% over the same period in 2006.

IDC also reported that Google’s net U.S. Internet advertising market share was down 0.5 percentage point to 23.7% in the fourth quarter, compared with the third quarter of 2007, due to slower domestic growth.

"If a merger between Microsoft's new media business and Yahoo would come to pass, the combined entity would have a net U.S. advertising market share of about 17% based on our fourth quarter 2007 data," said Karsten Weide, program director of IDC's Digital Marketplace: Media and Entertainment service.

"It would not quite bring Microsoft-Yahoo to where Google is in online advertising in the U. S., but it would give them a much better fighting chance than if they went it alone."

—Kate Maddox