• by Wendy Davis  @wendyndavis, July 11, 2005

Leading online retailers will increase sales and marketing sending by an estimated 28 percent this year, while revenues will grow just 24 percent, predicts a recent Merrill Lynch report on e-commerce.

But, despite the predicted year-over-year growth, the report, released last week, also estimates that ad spending at Amazon, eBay and Overstock was down sequentially in the second quarter. Ad spending for online travel, by contrast, was estimated to have increased from the first to second quarter.

The report, released last week, also predicts that Google will continue to exert pressure on e-commerce companies, partly because Google has made it easier for consumers to comparison shop online. "Greater use of search provides consumers with more choice and pricing information, pressuring gross margins," stated the report, authored by research analyst Justin Post.

Merrill Lynch additionally noted that traditional retailers e-commerce sites also are putting the sqeeze on Web-only shops, thanks to the growth of vertical shopping search engines such as Shopping.com, Shopzilla and Nextga.com. "We believe offline retail competition will continue to pressure online retail industry gross margins as consumers are increasingly using comparison shopping to find attractive pricing," stated the report.