Merrill Lynch Raises Online Ad Forecast

Brokerage house Merrill Lynch Thursday raised its online ad forecast on the strength of the Interactive Advertising Bureau's report earlier this week estimating that third-quarter ad revenue surged 33% compared to last year.

Merrill Lynch now predicts that fourth-quarter online revenue will climb 30%, up from a previous estimate of 27%. For next year, Merrill Lynch is projecting 23.3% growth--up from a previous prediction of 22.5%.

The IAB this week estimated that third-quarter online ad revenue totaled $4.2 billion. For the first nine months of the year, revenue was up 35.5% compared to last year--surpassing Merrill Lynch's previous forecast of 31%.

For next year, Merrill Lynch expects paid search to grow 27% and branded ads to grow 21%. "We estimate search will account for 42-43% of online advertising spend next year, continuing to take share of the total online pie, up from 41-42% this year," wrote research analyst Lauren Rich Fine in the report.

Merrill Lynch also indicated that it might again raise next year's forecast. "With more spending going to social networks and online video really starting to become monetized, we suspect our estimates will need to be revised up over time."

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