• by Gavin O'Malley  @mp_gavin, April 5, 2011

Taking seasonality into account, the display ad industry continues to experience solid growth and positive momentum, according to new data from Macquarie Capital.

The firm is maintaining its estimate of low-double-digit display growth for the industry in 2011, and upholding its current estimates for AOL, Google and Yahoo.

Showing the most improvement during the first quarter of the year, AOL's home page had one of the highest proportions of oversized/ custom ad units at 26%. It also had the highest percentage of purely brand-focused advertisers, which Macquarie views as a positive indicator of ad quality.

"While Project Devil sightings on the home page were very scarce in [the first quarter], we believe AOL has had more success with Devil across AOL's other properties, and we expect to see them increase this in [the second quarter]," says Macquarie analyst Ben Schachter. "The bottom line is that AOL's display business is trending well, and we believe we are past the worst in terms of growth."

Based on new data, Macquarie expects Yahoo's first-quarter display growth to come in slightly better than its 11.5% year-over-year growth estimate. In particular, Yahoo performed unusually well with Auto advertisers, as they accounted for 31% of total first-quarter ads, per Macquarie.

Macquarie, meanwhile, considers YouTube somewhat of a disappointment in this sense: its ability to diversify its advertising base on the home page slipped versus the fourth quarter.

"This may be seasonal, and it probably does not indicate any revenue weakness, but with 62% of its ads coming from media companies versus 50% in [the fourth quarter], we would prefer to see its vertical diversification increasing," Schachter says.

Also working against YouTube, Macquarie found that more expensive custom ad units accounted for just 2% of all ads in the first quarter versus 21% during the second half of the fourth quarter.

Worse still, among the sites analyzed by Macquarie, MSN continues to have the highest proportion of non-rich media ads on its home page, which it views as an indication of low ad quality.

Overall, use of oversized/custom ad units during the first quarter of the year were on par with the third quarter of last year.

"All else equal, we view a higher percentage of oversized/custom ads as a bullish indicator for home page ad buys and a positive read-through for display advertising more broadly," according to Schachter.