NEW YORK Widespread adoption of high-speed Internet connections are leading to more online activity, particularly search engine use, according to an investment bank.
Merrill Lynch said in a note to clients that it expects Web advertising to increase 29 percent this year to $12.4 billion. The bank said growth is being driven by performance-based advertising, mostly from search engines, which will account for 45 percent of online ad spending this year.
Lauren Rich Fine, Merrill Lynch’s Internet analyst, said search engines, particularly Google, are seeing more online searches due to always-on broadband Web connections. Citing figures from ComScore, Merrill Lynch said the number of searches per user has exploded since late 2004, rising over 16 percent in the first quarter of 2005. The bank anticipates a 20 percent rise in overall search volume this year.
Fine attributes this to broadband connections, which Merrill Lynch expects will rise from 32.3 million U.S. homes in 2004 to 40.8 million homes by the end of this year, a 26 percent growth rate.
Google is projected to be the biggest beneficiary of broadband-fueled search increases. Fine forecasts Google will net revenues, excluding commissions paid to distribution partners, of $3.8 billion in 2005 and $5.2 billion in 2006.
Fine does not believe the trend toward performance-based online advertising will abate. From 2005 to 2009, she believes performance sales will rise from 45 percent of Web ad spending to 49 percent, with a 26 percent compound average growth rate.
Broadband Seen Driving Web Ad Surge
