• by Joe Mandese  @mp_joemandese, January 21, 2005

A majority of national advertisers have accelerated the shift of ad budgets from print media and broadcast TV to cable TV and the Internet, according to findings of a survey of national marketers released Friday by the equities research team at Merrill Lynch.

Describing the pace as faster "than we realized," the securities firm now projects that online advertising will pick up half a point of U.S. ad market share during 2005.

"We are currently estimating that online advertising will reach $9.7 billion in 2004 followed by 19 percent growth in 2005, representing 4.2 percent of US ad expenditures, up from 3.7 percent in 2004," says the report, based on what Merrill Lynch analysts described as an "informal survey" of national advertisers. "We are in the camp that online will rise as a proportion of total U.S. advertising, and globally, faster than initially expected, especially as research that marries on line behavior with offline purchases improves. Search will be an important component, but branded is enjoying rapid growth as well."

Among the marketers Merrill Lynch surveyed, it cited an "auto manufacturer" that already commits 7 percent of its ad budget to the Internet, and a consumer packaged goods/pharmaceutical company that devotes 5 percent to online.

Despite the migration online, the team, led by lead analyst Lauren Rich Fine, said, "We do not think the Internet will replace other traditional media expenditures, but it could limit the overall growth especially as younger generations eschew traditional media in favor of online."

According to the survey, a recent secular concern is impacting the newspaper industry: circulation trends.

"National newspaper advertisers express reservations regarding ad rates," said the report. "We met with 15 print advertisers last week and they expressed reluctance to pay higher ad rates for newspapers given the declining circulation trends. As a reminder, national advertising produced an estimated 18 percent of newspaper industry ad revenues in 2004."