Online advertising will continue to gain share at the expense of print-based media, Nomura said, starting coverage of Google Inc with its top rating.

We strongly prefer Google, as it continues to be a share gainer, driving the search and (increasingly) display markets, while Yahoo remains a laggard, said Nomura analysts, who also set a neutral rating on Yahoo.

Over the next five years, online advertising, which accounted for about 17 percent of the global ad market last year, will grow at a compound annual growth rate of 11.4 percent, while newspaper advertising will drop 2 percent.

The growth will be led by search-based advertising, contributing 58 percent of the increase, while display will account for the rest, the analysts, including Brian Nowak, said.

Search-based advertising refers to the practice of placing relevant advertisements and links next to search results, while display ads are placed on static content pages.

The analysts said unlike the search market, the display market is highly fragmented, has lower barriers to entry and may see lower pricing growth.

If companies attempt to charge substantial advertising premiums, there are thousands of alternative sites charging less that advertisers can shift their dollars toward, the analysts said, noting that such options are limited in the search category.

Google, which accounts for about 69 percent of the global search volume, will see its share of the total global advertising market grow to 11 percent from 6 percent in five years, while Yahoo is likely to lose share further, they added.

Nomura set a price target of $750 on Google shares, and $13.50 per share on Yahoo. Shares of Google closed at $614.25 on Monday on the Nasdaq, while those of Yahoo closed at $14.62.

(Reporting by Chandni Doulatramani in Bangalore; Editing by Sreejiraj Eluvangal)