• by Laurie Sullivan  @lauriesullivan, January 4, 2010

Display advertising should recover and rise nearly 11%, global search will grow roughly 17.8%, and ecommerce will hit an inflection point, with Amazon.com emerging as the clear winner. That's according to J.P. Morgan's 2010 Internet Industry Outlook released Monday.

Interestingly, J.P. Morgan analyst Imran Khan expects ecommerce to rise about 12%. Aiding to the uptick, he notes brick-and-mortar bankruptcies, consumers finding selections at offline retailers limiting, and both fulfillment by Web sites and alternative electronic payments becoming easier to use.

Data estimates from Chase Paymentech and J.P. Morgan suggest that online ecommerce had a positive 2009 holiday season. At 50 of the top ecommerce 250 sites that Chase tracks, consumers spent nearly $10 billion from Nov. 5 through the year-end -- up 17% year-on-year same-store sales, although the average selling piece came in 9% lower compared with the prior year. Transactions rose 29% in 2009, suggesting that consumers felt more comfortable buying online, according to the report.

J.P. Morgan's 328-page 2010 Internet Industry outlook also suggests that cyclical cost-per-click (CPC) and international growth will push up the overall search market. The report pegs Google's 2010 net revenue and pro forma estimates per share (EPS) at $21 billion and $26.91, respectively.

In the U.S., search engines generated about $65 per Internet user in 2009, while Khan estimates the international market generated about $15 per search Internet user. He writes that the gap is due to digitalization of content, and lack of broadband penetration, but estimates that advertising outside the U.S. represents roughly half of global advertising revenue. This offers significant growth potential in ad revenue outside the U.S.

Expect search revenue to climb, reaching $16.5 billion in 2010 representing 13% growth from the prior year, according to the report. In 2011, Khan believes that search revenue growth will further benefit from an increase in mobile browsers and smartphones.

As the economy improves in 2010, Khan believes that major ad categories, such as auto and finance, will begin to stabilize. Display advertising is under-penetrated and has significant opportunity to gain ad dollars from traditional advertising.

Khan estimates that U.S. display advertising will rise 10.5% year-on-year in 2010. RPMs should grow at 5%, driven by flat growth in impressions per page, offset by a 5% increase in CPMs. The long-term view in the U.S. puts the display ad market at 8% CAGR from 2009 to 2011, estimating $7.539 million and $8.794 million, respectively. Improved pricing trends and flat ad coverage as budgets stabilize will have the greatest impact on the 2010 recovery, he writes.

Social networks will become a new platform and gateway. Facebook surpassed 100 million U.S. visitors in Nov. 2009, and about 440 million worldwide, according to the report. It goes on to explain that the social network site accounts for nearly 5% of all time spent on the Web worldwide in October 2009. Khan attributes this success to it being a trusted network, and having robust applications and a scalable technology platform. Other analysts and experts in the past have noted its easy-to-use mobile application and advertising model.

Khan also notes that Facebook and other social sites could potentially become a long-term threat to search engines when it comes to a source of directing and redirecting online traffic to and from other sites.