The amount spent on sponsored search listings will increase 47 percent this year--to around $5.1 billion, from around $3.5 billion in 2004, predicted Merrill Lynch in a report on Internet advertising
issued Thursday. Paid search and paid inclusion together will likely reach $5.5 billion this year--which represents 45 percent of Merrill Lynch's estimate for the total online ad market in 2005.
Much of the growth will stem from the rise in broadband adoption--which, predicts Merrill Lynch, will result in more queries to search engines. "[S]earch volume growth really has been the
bigger driver of growth in paid search advertising in late 2004 and into early 2005," stated the report, authored by Lauren Rich Fine, first vice president at Merrill Lynch. "We believe this trend
will continue as broadband subscription prices continue to drop, more users move to broadband connections, and ultimately conduct more queries."
The investment house specifically
predicted a 20 percent increase in query volume for the year, adding that the surge has already begun. A Merrill Lynch analysis of data from comScore Networks revealed that the volume of queries per
user grew between 16 and 18 percent in the first quarter of this year, compared to between zero and 4 percent a year ago.
Merrill Lynch's predictions of an uptick in paid search spurred
the investment house to revenue estimates for Google for next year--to $5.2 billion, from $5.1 billion, despite increasing competition from rivals MSN, which recently launched its own search engine,
and Yahoo! Even beyond 2006, Merrill Lynch predicts that Google will remain strong against the competition. "[T]he company's ability to withstand market share loss is better than we previously
expected," stated the report.
Overall, Merrill Lynch continued to predict that online advertising would reach $12.4 billion this year and $25 billion by 2009.