December data collected by search engine intelligence firm AdGooroo found 4Q08 was the "strongest quarter on record" for Google and Microsoft Live Search.

Both companies enjoyed a sharp rise in advertiser growth. The number of ads per keyword on Google also increased, with overall ad growth for the latter rising 58% from Q3.

"The increase in active advertiser counts is surprising given the current environment of gloom and doom," the firm wrote in its mid-quarter report.

Microsoft advertiser share leapt to 16.4%, three percentage points away from closing the gap with Yahoo, which last quarter led by nearly 18 percentage points.

Because Microsoft and Yahoo have little overlap among top advertisers (which generate 80% of all ad impressions), a merger of the two would increase large advertiser count by 157%, AdGooroo noted.

That means more relevant ads, which would lead to more competitive bidding and higher monetization levels, not to mention the emergence of a "real credible competitor" for Google, Microsoft's CEO Steve Ballmer explained last month.

Below, monthly growth in advertiser count (Nov. '07-Dec. '08):

Along with Yahoo's December decline, the chart reflects Google's incredible August dip — likely the result of the company's choice to reduce coverage (the percentage of web pages where it displays ads) to an all-time low.

Over the summer, Google deliberately lowered ad coverage to improve what it called "ad quality" — with the goal of cutting clutter and increasing ad relevance, The New York Times reported in July.

By Q3, the number of ads per keyword on its search engine averaged 2.5.

Prior to Q4, Google increased the number of ads per keyword to just over four — more than any of the top three search engines globally.

In November, Google ads began appearing in new places: within YouTube search results and on Google Finance, for example. Image-based ads were also incorporated into standard search results.

At month's end, Google loosened its policy on beer ads (a looser hard liquor ad policy followed after), then reversed its June '07 ban on UK-based ads related to gambling.

The search giant's online advertising machinations don't stop there. The patent office recently revealed Google's plans to develop revenue models for social networking.

In addition to opening new profit streams, Google is cutting costs: getting rid of certain food perks, increasing on-campus day care costs, and laying off a "substantial number" of temporary workers.