Online advertising forecast grows bleaker

Wall Street analysts chop growth projections for online advertising, with display ads taking the brunt of the cuts.

Growth projections for online advertising received another knock to the knees on Monday, as analysts continued to lower their outlooks.

The online advertising industry is expected grow 11 percent in the U.S. and 9 percent worldwide next year, down from a previous estimate of 13 percent for both figures, according to a research note by analyst Jeff Lindsay of Sanford C. Bernstein & Co.

Earlier this the month, Jim Friedland of Cowen & Co. placed a much more dire outlook on the industry, predicting an anemic 3 percent growth in the U.S. next year, down from his previous forecast of 13 percent.

In taking such a bearish position, Friedland mainly pointed to a decline in online display advertising, which he expects will suffer from a high single-digit drop-off in ad budgets.

Indeed. Yahoo, which holds a sizable presence in display advertising, last month posted a 64 percent drop in third-quarter earnings and ordered a round of layoffs.

Paid-search advertising in the U.S. is also expected to feel the pain next year, with that segment predicted to post a six-point decline to growth of 11 percent, Friedland said in his note.

In Friedland's prediction of paid search growing in the low double-digits, as compared with display advertising in the low single-digits, Google would do well, given that it's a dominant player in paid-search ads.

 

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