• by Wendy Davis  @wendyndavis, May 9, 2006

Merrill Lynch raised its forecast for this year's online ad market to 28.7 percent growth--up from its previous estimate of 27.5 percent growth, based on a stronger-than-expected first-quarter showing by Google.

In a report issued Monday, Merrill Lynch predicted that search advertising alone would grow 32.7 percent, up from the prior forecast of 31.6 percent. Merrill Lynch now estimates that the U.S. online ad spend will total around $16.15 billion this year, or 5.5 percent of total ad spending.

The revision was prompted by Google's most recent earnings report, which showed that the company took in $2.25 billion in revenue, marking a 17 percent increase from the fourth quarter, and a 79 percent increase over the first quarter of 2005.

"We believe Google, the leader in search, is not only taking share in the U.S. from the competitors, but is also benefiting from incremental gains in the search category," stated the report, authored by research analyst Lauren Rich Fine. Merrill Lynch found branded advertising also to be strong, and predicted growth of around 30 percent this year. The financial services company also reiterated its prediction that online branded would account for about 34 percent of the total online ad spend this year.