Anmuth says his research shows an increase in pricing for Google’s search ads over the past few months, particularly in the battered retail and auto sectors. His note comes a couple days after Citigroup’s Mark Mahaney raised his Google estimates, citing a dramatic improvement from mid-August to mid-September.

Other Google bulls: Investors, who have been pushing up the company’s shares since March (they’re now hovering near the $500 mark again), and CEO Eric Schmidt, who declared this week that “it’s clear that the worst is behind us.”

The tempered enthusiasm isn’t limited to Google’s chances, by the way. Mahaney also had good things to say about Yahoo’s (YHOO) chances as the economy recovers. While Yahoo is handing over its search business to Microsoft (MSFT), Carol Bartz and crew still dominate the display ad business, and that should be picking up as well, he said.

It is worth noting that Yahoo executives themselves were more cautious this week when asked to describe market trends: At an Advertising Week press conference, Bartz brought out her “still bumping along the bottom” line, while EVP Hilary Schneider said ad sales had stabilized but that she “wouldn’t go so far as to say as we’re seeing a full recovery.”

That’s the conclusion Citigroup’s (C) Mark Mahaney reached after taking Microsoft’s (MSFT) new search engine for a spin and comparing it to Google’s (GOOG) and Yahoo’s (YHOO). The result: Google still delivers better results most of the time. In 71 percent of searches, Google either supplied the most relevant answer or tied with other engines. Bing did that 46 percent of the time.

But it’s worth checking out the results of Mahaney’s test to see exactly how the search engines stack up. For one thing, as he notes, Bing’s results are getting better as it matures–it’s only been live for about a month–and as it adds bells and whistles (for instance, it is catering to vanities of certain bloggers by including their Twitter stream in search results).

And Bing also performs better for at least two kinds of searches: Health and travel. So if you need to book a trip, or if you pick up a rash on that trip, you might want to think about Binging before you Google.

First, Mahaney’s methodology:

Over the past two weeks, we conducted 200 queries across the three major Search engines–Google, Yahoo! and Bing. Most of the queries we picked came from Google Zeitgeist, Microsoft’s xRank and Yahoo! Buzz, along with some personal queries. These queries spanned multiple categories, including Entertainment, Health, Local, News, Retail, Sports, Travel and Other. After conducting the same query across all three Search sites, we picked a winner based on: 1) relevancy of the organic search results; and 2) robustness of the search experience, which included factors such as image and video inclusion, Search Assist, and Site Breakout.

And his results. Overall relevancy (click to enlarge):

Relevancy by topic (click to enlarge):

Mahaney’s argument is simple: 1) Media sales represent half of Amazon’s North American business and 2) They have been slowing consistently for a while. Here’s what the numbers look like (click to enlarge):

Why are media sales slowing down? Mahaney, an Amazon (AMZN) bull, throws out some ideas:

This may well be the most discretionary/recession-sensitive segment of Amazon. That surely explains part of the slowdown. But three other factors may be material. First, this segment includes Books, Music, and Videos (in addition to Video Game Software)–products that have had inherently slow overall retail growth over the last few years. Second, this segment includes products that are over-indexed in terms of Internet penetration. And third, this segment contains products that are being rapidly digitized–even the plain old book, thanks in part to the Kindle.

The last point is the most interesting one to chew on because Amazon bulls usually argue that the company is the best-positioned player to adapt to the digitization of media. And they’re probably right. But it sure does increase the pressure on the company to get it right, which will probably involve charging more for the digital music and books than it does now.

Neither company will disclose how much money Best Buy (BBY) is putting into the fund, so it’s difficult to gauge how big a deal this is, or isn’t. But we do know that the retailer has already shelled out $121 million for Napster, so presumably it’s ready to spend that much again, at least. Another sign Best Buy is serious about this whole digital thing, or at least wants to signal that it is: Multiple sources tell me it has created a position for a chief digital officer and is searching for one now.

The deal also signals that Velocity, the firm Levinsohn created with former AOL CEO Jon Miller, will continue even though Miller is now heading up digital operations for News Corp. (NWS), which owns this Web site.

Miller took Velocity partner Jorge Espinel with him when he joined News Corp., but Levinsohn, who earned his reputation when he helped News Corp. buy MySpace (following this?), will be staying on. Oh, and for good measure, Velocity is changing its name to Fuse Capital. Presumably there’s a good reason for that, but the press release below doesn’t spell that out.

VELOCITY INTERACTIVE GROUP CREATES NEW DIGITAL MEDIA FUND WITH BEST BUY;
MARKS LAUNCH OF STRATEGIC EQUITY MANAGEMENT INITIATIVE FOR FIRM

Velocity to Change Name to Fuse Capital
Los Angeles – May 28, 2009 – Velocity Interactive Group, a leading venture capital firm in digital media and communications with more than $1.4 billion under management, today announced a strategic partnership with Best Buy that includes the launch of a new digital media fund.  With Best Buy as the sole limited partner, the fund will seek to leverage the scale and scope of the multinational consumer electronics retailer to help drive growth and enhance performance of the portfolio companies.  The fund will focus on strategic digital media investments as a complement to Best Buy’s current digital media and emerging technology investment activity.  Separately, Velocity is also announcing that it will change its name to Fuse Capital.

The new fund is designed to focus on investments in digital media companies that will help create the next generation of leaders in categories such as music, video, games, and personal media management, as well as other areas that leverage the touch points and reach of Best Buy.  As part of the relationship, Fuse will work closely with Best Buy on digital media strategies and support the company’s existing digital assets.

The Best Buy partnership marks the launch of Fuse’s expansion into strategic equity management. The focus of the strategic equity management initiative is to become partners with global corporations that seek to augment their digital strategic initiatives with the knowledge and expertise of an investment firm dedicated to digital media and communications.  Fuse’s portfolio will benefit from the partnerships with these global corporations which enable them to jump-start and launch with critical mass, greatly improving the likelihood of success.  Fuse’s decision to change its name from Velocity to Fuse Capital reflects this strategic focus.

“This strategic initiative is a natural extension and evolution of our capabilities, given our firm’s extensive strategic, investment and operational experience in both emerging companies and large corporations across digital media,” said Ross Levinsohn, managing partner, Fuse.  “As for our first partner, Best Buy is the preeminent retail leader in technology and entertainment products and services, and is exceedingly well positioned to take advantage of the massive shifts occurring across the media and commerce landscapes.”

“This partnership is another example of how we strive to be at the forefront of consumers’ entertainment and digital lives,” said Mike Vitelli, executive vice president, customer operating groups, Best Buy.  “We are pleased to be working with Fuse and look forward to working with them to lead the market transformation in digital media.”

The six-unit Virgin Megastore chain will close two more stores, the Union Square location in New York City at the end of May and the Market St. store in San Francisco at the end of April, sources say….

In August 2007, the Virgin Entertainment Group North America was acquired by two real estate companies–the Related Cos. and Vornado. Since then, the chain has been reduced from 11 units–with the industry awaiting word of the fate of the three remaining stores in Denver, Los Angeles, and Orlando, Fla.”

At this point the real news should be when people buy music at brick-and-mortar outlets at all. They still do: CD sales continue account for the majority of big music’s revenues.

But as the handful of remaining music stores vanishes, and the big boxes like Wal-Mart (WMT) and Best Buy (BBY) keep cutting back the space they allot to discs, that won’t remain true for long.

One rumor that has yet to materialize, though: A cheap version of the phone priced at $99. Instead, Wal-Mart (WMT) will sell the phones at about the same price that everyone else does–the black 8GB iPhone 3G model will go for $197 and the 16GB black or white model will be at $297.

What will this do for Apple’s (AAPL) iPhone sales? Dan Frommer at Silicon Alley Insider does the math:

If each Wal-Mart store gets an average 200 iPhones as inventory, that’s 500,000 iPhone shipments Apple can recognize this quarter. Even if each store gets an average 100 iPhones, that will nicely pad this quarter’s numbers. (And if for some reason Apple waits until next quarter to recognize the shipments, they’ll help during a seasonally slow March quarter.)”

Jeff Bezos and company won’t say. Amazon (AMZN) is only doling out a handful of statistics to quantify its success. Like the number of items ordered on its peak day–6.3 million–and the number of items shipped on its peak day–5.6 million units.

Those numbers don’t give you any sense of what kind of stuff consumers were ordering, and what prices. Observers will eventually get a better handle on that over time as Amazon releases its financials, but don’t expect too much disclosure: The company is famously reticent about letting outsiders peek inside.

And in any case, Amazon was supposed to do well over the past few months. The real surprise would be if the company had said it hadn’t crushed the holiday season, which is why Amazon’s shares are only up by two percent or so today.

I don’t think this is quite what advocates of “creative destruction” have in mind when they talk about the upside of economic turmoil. But it’s worth noting anyway: The daily drumbeat of layoffs, shutterings and other grim economic news has inspired a boomlet in Web sites and services dedicated to tracking them.

A sampling:

• It Died: A deadpool that includes not just Internet companies, but Internet services
• Timely Demise: Dedicated specifically to retail closures
• themediaisdying: A Twitter account that covers…well, you guess

All of these seem to be amateur/part-time efforts. But there’s probably a real, if short-term, opportunity for someone to make a real business out of a comprehensive layoff site–a F***edCompany for our times.

Because, unfortunately, there’s going to be plenty of news to come, especially after retailers digest their holiday sales numbers.

In the meantime, this may be a fraught week for remaining employees at Time Warner’s (TWX) Time Inc., who are still waiting to hear about additional cuts at the magazine publisher.

Several of the company’s titles, for instance, have warned that they’d start firing people this week if they didn’t get enough volunteers to quit on their own.

And of course, I cover this stuff, too. If there’s news you think I ought to be covering, please let me know. You can email me at peter@allthingsd.com, or you can use the new All Things Digital tip box, where your notes will be completely anonymous. Please bear in mind that if you do use the tip box, I won’t be able to follow up with you, unless you include contact information.

[Image Credit: mfx]

MasterCard Advisors, a unit of the credit card company, says sales in categories like apparel and electronics have dropped more than 19 percent in the first two weeks of November compared to the same time a year ago. E-commerce sales are comparatively better, but they’re still grim–down 7.5 percent, the company says.

Bad news, obviously, for Amazon (AMZN), eBay (EBAY) and everyone else who sells stuff online for a living. If you’re looking for a sunnier take, you can cling to more optimistic predictions from the likes of eMarketer, which thinks that e-commerce will eke out a four percent gain in November and December. UPDATE: Fresh prognostication from Barclays Capital (i.e., the investment bank formerly known as Lehman): three percent growth during the holiday season, which is down from the eight percent the research group had previously predicted.

Too unpleasant to contemplate early on a Monday morning? Agreed. Let’s think about something more upbeat. I’m pretty sure, for instance, that I am going to be able to buy a very nice television for not much money in the next couple months. I just hope I have a wall to hang it on.

[Image Credit: woohoo120]