• by Mark Walsh  @markfwal, June 12, 2009

"Cautiously optimistic" is how RBC Capital Markets describes the outlook for online advertising based on presentations and panels from companies including Yahoo, ValueClick and MDC Partners at its tech conference this week.

While company fundamentals have not changed much since the first quarter, most online ad industry executives expect the third quarter to mark a turning point in the industry's rebound from recessionary trends, according to a new RBC research note. Display advertising, especially hard-hit by the downturn, appears to be showing the first sign of a pick-up this month.

CPMs have started to flatten out in the second quarter after four consecutive quarters of declines, according to ad network panelists at the RBC conference. However, the investment firm cited regulatory risk surrounding behavioral advertising as a "serious concern" for the display segment. RBC recently estimated that behavioral targeting could account for 15% to 20% of the $9 billion online display marketplace, or about $1.8 billion.

On the search side, budgets have been "flat-to-down" from the first to the second quarter, showing single-digit growth from a year ago. As with display, search in June began showing signs of rebounding. With companies overall saying that online ad commitments are looking stronger in the second half of the year, RBC projects that the third and fourth quarters could see growth.

For the year, RBC analyst Ross Sandler said he expects low single-digit growth. That would correspond to the 4.5% gain in online ad spending that eMarketer predicts for 2009. The Interactive Advertising Bureau this week released data showing that online ad dollars fell 5% in the first quarter to $5.5 billion, the first yearly decline since 2002. To meet eMarketer's projection of $24.5 billion, online advertising would have to average $6.3 billion over the next three quarters.