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eMarketer lowers online ad spend forecast

New report lowers projections for online ad spending in the U.S. due to soft economy and advertisers not flocking to social networks.

Research firm eMarketer has lowered its forecast for online ad spending due to the "foundering" economy and problems social networks are having attracting ad dollars.

The firm now projects that 2008 online ad spending in the U.S. will be $25.8 billion, down slightly from the $27.5 billion it had forecast for 2008 in October.

The growth rate for online ads, which was nearly 35 percent in 2006 and 25 percent last year, is expected to be 23 percent this year, then drop to around 16 percent or 17 percent for a few years until rising to 24 percent in 2012, when online video advertising is expected to boom amid a larger economic recovery, the report says.

The report, titled "U.S. Online Advertising Spending: Resilience in a Dicey Economy," will be released later this week. It reflects 2007 online advertising figures from the major portals, which receive 57 percent of the total spending in the U.S., according to eMarketer senior analyst David Hallerman.

"Over the next few years, (there are) indications of continued economic problems," he said. "Paid search will be hurt as consumers shop less."

In addition, popular sites on the Internet have had difficulty monetizing their traffic; "for example, the most popular sites in social networking where the amount of traffic and the amount of ad dollars don't match up. Maybe they won't," Hallerman said.

"While a foundering economy will certainly affect online ad spending, accounting for the revised estimate, the Internet will support continued ad spending growth even as other media may falter," an eMarketer statement says.

Still, there are positive growth rates for online ads and "far more" than any other media because advertisers will want to spend money on more measurable marketing, Hallerman says.