• by Mark Walsh  @markfwal, June 17, 2010

When the Interactive Advertising Bureau reported that online ad spending hit a higher-than-expected $5.9 billion in the first quarter, research firms and Wall Street banks scrambled to revise their forecasts upward for the year.

Among them was eMarketer, which increased its projection for the online ad market in 2010 from $23.6 billion to $25.1 billion, up 10.8% from 2009. A new report released this week by the research outfit shows eight of 14 forecasters including ZenithOptimedia, Magna, JPMorgan and IDC are now predicting double-digit growth this year, with the balance expecting gains in the range of 2% to 9%.

In upping its own forecast, eMarketer cited a faster-than-expected uptick in the U.S. economy, with more shopping by consumers and increased marketing spending by companies. Rebounding ad budgets are also contributing to the shift from traditional to digital media as marketers seek out targeted audiences.

But eMarketer acknowledges that fears of a double-dip recession sparked by the European Union debt crisis could end up dampening anticipated spending levels by both consumers and companies. "Much is still unknown, but it's clear that a larger portion of total media ad spending will migrate to the Internet, even if overall ad spending remains stagnant," states the report authored by analyst David Hallerman.

Underscoring that trend, eMarketer estimates the Internet will account for 15.1% of total media spending this year and more than 20% by 2014. Partly because of its small base, online video advertising is projected to see the biggest growth in 2010, jumping from about $1 billion to $1.5 billion.

Search, however, will remain by far the biggest single category this year at $12.4 billion, or nearly half of overall online ad dollars. Spending on banner ads, which will make up nearly 22% of online ad budgets this year, will be roughly flat at $5.5 billion. Other areas such as rich media, lead generation, classifieds and sponsorships will be flat or down.

EMarketer points out that money that once went to display is going to social media marketing, or "earned media," which doesn't show up in spending charts and is harder to trace. But with its surging audience, Facebook in the first quarter sold more display ad impressions than Yahoo for the first time. Its 176.3 billion impressions accounted for 16.2% of the U.S. total, followed by Yahoo's 131.5 billion (12.1%) and Microsoft's 60.2 billion (5.5%).

Still, the four traditional Web portals -- Yahoo, AOL, Microsoft and Google -- will manage to garner nearly 60% of all Internet ad dollars this year. The lion's share of that spending will go to search king Google, which in the first quarter collected nearly $4 of every $10 in U.S. online advertising.

Although the smallest of the portals, drawing only 3.9% of spending in the first quarter, eMarketer suggested that AOL could shape up as a bargain buy for advertisers. "As the company looks to reinvent itself as a content destination, its ongoing ad revenue softness could give marketers ad-pricing leverage. Combined with the portal's continued strong traffic -- a 10.9% share of U.S. portal front-page visits in April 2010, according to Hitwise -- that makes AOL a good value for many marketers," states the report.

EMarketer predicts Google and Microsoft will both enjoy ad revenue gains this year -- of 20% and 14.4%, respectively -- while Yahoo ad sales will drop 2.2% and AOL's, 10.2%. That will add up to a 12.4% gain for the portals overall after a 1.2% decline in 2009.