JP Morgan Cuts Online Ad Outlook; Gap Between Search And Display Widens

JP Morgan internet analyst Imran Khan is lowering his online ad spend forecast into next year due to the worsening economy. Sensing that marketers are becoming more conservative with their ad spend, Khan expects that long-tail advertisers will shift toward performance-based advertising forms. Therefore, display ads will suffer more than search. And so, JP Morgan is lowering its ’08 US display market estimate to $8.2 billion from $8.6 billion — or 14 percent year-over-year growth, versus its previous call for 20 percent growth. Looking to ’09, the analyst is dropping its projected display forecast to $9.4 billion from $10.0 billion (representing 16 percent growth compared to his prior estimate of 17 percent gains.)

Search gets slightly more attractive: As for search ad spending, despite the overall tightening of marketer’s online ad budgets, much of this effect offset by the market share shift towards ROI-rich performance-based ads. So JP Morgan’s search outlook is being dropped only slightly. Khan now estimates growth this year will be 27 percent from the previous projection of 32 percent. With the economy expected to improve somewhat next year, Khan is expecting only a modest slowing in search ad gains with 26 percent year-over-year growth.

Comparable to others’ changed outlook: The estimates are largely in line with other forecasters’ recent downward revisions, including Carat (23.3 percent global ad spend growth this year, with 18 percent gains in

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