• by Gavin O'Malley , February 1, 2005

Growth in online ad spending--and paid search in particular--measured as a year-over-year percentage increase, peaked in 2004 and will continue to decline through 2008, according to research and forecasts compiled by eMarketer and released Tuesday.

"I think a lot of search and advertising professionals are going to be surprised," David Hallerman, eMarketer senior analyst and author of the report, said in a statement. Hallerman described his findings as a welcome retreat from the "bubble-and-burst expansion" of recent years.

eMarketer found that year-over-year growth in online spending will drop from 30.7 percent in 2004 to 21.1 percent in 2005, and should hit single digits by 2009.

Publishers and online marketers reacted skeptically to the report Tuesday. "Where are the ad dollars going to go? TV?" playfully asked Azhar Rafee, senior vice president and global head at Reuters.com. Rafee's remarks were in response to a question posed by a journalist at a panel discussion at the Software & Information Industry Association's 2005 Information Industry Summit in New York City.

"We're definitely not seeing a decrease in interest from our clients," said Jeffrey Herzog, CEO of search engine marketing firm icrossing, which just announced the expansion of its service to include a Search Intelligence service. The analytics-driven offering uses the data gleaned from keyword traffic and conversions to drive online and offline client sales. A newly formed Applied Search group will combine creative services with search to further promote and protect brands.

Other panelists at the conference either dismissed eMarketer's sobering numbers or attributed them to the market's natural maturation, and the continued integration of once disparate ad spending channels.