(Adds comments from CEO, background; updates share movement)
By John Tilak
BANGALORE, Jan 22 (Reuters) - Shares of Internet content company IncrediMail Ltd MAIL.O rose as much as 32 percent Tuesday, a day after it said Google Inc (GOOG.O), its biggest customer, restored an advertising service partnership between the two firms.
"We have been reinstated and revenue is flowing back again," Chief Executive Yaron Adler said by phone.
On Jan. 11, IncrediMail said it got a notice from Google stating that the Web search giant decided to stop the partnership, which is called AdSense. Before Tuesday's gains, IncrediMail's stock had fallen about 30 percent since the news.
The Tel Aviv, Israel-based company, whose main product is its namesake e-mail service, had said it was clarifying the matter with Google and was exploring alternative relationships with other vendors.
Adler declined to say why Google, which contributes about 40 percent to IncrediMail's revenue, decided to reinstate the relationship, or why the AdSense partnership had been previously discontinued.
AdSense enables Web site publishers to display relevant ads on their sites and earn money. The ads are administered by Google and generate revenue on either a per-click or per-thousand-impressions basis. Adler said that Google's decision to stop the partnership had nothing to do with click-fraud -- involving boosting the number of clicks in order to increase the amount the company can charge the search provider -- as some investor Web sites and blogs had speculated.
"I've heard the rumors myself. There hasn't been click-fraud or anything of that sort," Adler said.
Following Google's decision to pull out, IncrediMail has started talks with other companies for possible search-related relationships, Adler said.
"IncrediMail is speaking to all the major players," Adler said, without naming any companies.
Other companies providing services similar to Google's AdSense are Yahoo Inc YHOO.O, Microsoft Corp's (MSFT.O) MSN and IAC/InterActiveCorp's IACI.O Ask.com.
IncrediMail's Web site generates revenue by selling software products, offering subscriptions to its content database, and by selling paid advertising, sponsored links and keyword search capabilities on its Web site and e-mail client.
Adler said IncrediMail plans to arm itself with several alternatives to reduce the risk of being dependent on a single customer -- Google -- for a big chunk of revenue.
IncrediMail has already tied up with Yahoo for its online dating service.
The company said although the temporary disruption of AdSense-related services will have a negative impact on its first-quarter search-generated revenue, results will continue to be driven by revenue from the segment.
Adler said the company lost search-related revenue from about a week to ten days.
IncrediMail shares rose to a high of $4.24, before falling back to trade up 13 percent at $3.63 in afternoon trade on the Nasdaq. (Editing by Pratish Narayanan)