Silicon Valley's Web sector surged in 2012, thanks to a powerhouse performance by Google (GOOG) and strong growth by Facebook and LinkedIn.

Google continued to dominate the search advertising business last year, while also showing more ads on YouTube and developing new services for mobile Internet users. The Mountain View Internet giant racked up more than $51 billion in sales, elbowing past Cisco (CSCO) and moving up one notch to No. 4 on the Silicon Valley 150 list.

The company also had a few rough spots, including legal battles over patents and scrutiny over privacy and antitrust issues. It's still working to turn around Motorola Mobility, the struggling handset maker it bought for $12.5 billion in May.

But Google's Android software reigned as the world's most popular smartphone operating system, outselling Apple's (AAPL) iPhones. And Google earned favorable buzz for cutting-edge tech projects like its driverless car and the wearable computer known as Glass.


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Some investors question the value of those products, UBS analyst Eric Sheridan said in a recent report, but he noted that critics previously were skeptical of YouTube and Android, which are now key elements of Google's business strategy.

Facebook, meanwhile, dominated headlines in the first half of 2012 as the world's leading social networking company prepared to go public. The much-hyped stock offering fizzled, but Facebook still saw significant revenue growth.

Yahoo (YHOO) struggled with CEO turnover and weak ad sales. While new chief Marissa Mayer has vowed to beef up mobile services, Wedge Partners analyst Martin Pyykkonen said, it's not yet clear whether the pioneering Internet company can regain relevance to advertisers.

Contact Brandon Bailey at 408-920-5022; follow him at Twitter.com/BrandonBailey