• by Gavin O'Malley  @mp_gavin, July 14, 2010

Online advertising continues to grow rapidly, with double-digit growth rates among many of the industry's key segments, including online video and paid search. Yet growth for digital media is partially being held back by weakness in the online classifieds sector, according to an updated forecast released Wednesday by Mediabrands' Magna Global.

"The depth of this weakness has caused us to slightly reduce expectations for the sector as a whole even as online advertising and digital media continue to increase in importance for advertising," said Brian Wieser, director of global forecasting for Magna.

Likewise, eMarketer reported last month that spending on classifieds -- along with lead generation, rich media, and sponsorships -- would either be flat or down for the year.

Magna's revised forecast also points to a slowdown in direct media, which incorporates Internet Yellow Pages, paid search, and lead generation.

Collectively, this segment accounts for more than a quarter of all suppliers' ad revenue, and this share was rising rapidly during each quarter in 2008 and 2009.

However, Magna's estimates for the first quarter of 2010 indicated slower-than-expected growth for most of these subsegments. "While we expect the trend of increasing reliance on direct media to resume over the long term, the worse-than-expected results may indicate a resumption of focus on awareness-driven media channels as the economy improves," according to Wieser.

In addition, they may also reflect continuing weakness among advertisers who focus on these channels -- namely small and medium-sized advertisers -- in contrast to returning growth for the larger advertisers, who have historically focused on mass media vehicles.

Overall, Magna forecasts that the U.S. ad economy will grow by 2.1% during 2010, excluding political and Olympic ads on TV. That projection is marginally higher than its prior forecast of 1.6% year-to-year growth.

Earlier this year, Magna reported that online advertising would once again prove to be the fastest-growing medium, with paid search alone rising 16.8%.

Helping to drive online advertising is the continued adoption of broadband Internet access nationwide. Indeed, even without government assistance, Magna recently predicted that Internet access will grow 30% to just over 100 million U.S. households in six years.