Analysts Bullish on Online Ad Spending

An emerging consensus paints a positive picture.

NOVEMBER 27, 2006 – The trend began early last week, when the Internet Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) released new data showing that US Internet advertising revenues reached a record $4.2 billion in the third quarter of 2006.

That represents a 35% increase over the $3.1 billion figure posted for the third quarter of 2005, and a 2% increase over the second-quarter 2006 total of nearly $4.1 billion.

“Interactive advertising, with its eighth consecutive quarter of growth and the largest single quarter ever, is on pace for its biggest year,” said David Silverman of PwC.

Now Merrill Lynch has raised its estimates.

Merrill Lynch now estimates that US online ad revenue for the first three quarters of 2006 was 35.5% more than in the same period in 2005. The firm previously forecast a 31% increase.

The company also now expects US online ad spending in the fourth quarter to be 30% more than it was in Q4 2005, up from its previous estimate of a 27% increase.

For 2007, Merrill is projecting 23.3% growth in online ad spending � up slightly from its previous projection of 22.5%.

Merrill Lynch expects paid search to increase 27% next year, and branded ads to grow by 21%.

Even with the injection of online video ad spending expected in 2007, the firm projects that search will still account for over 42% of the online advertising spend, up one percentage point from this year.

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