James Mitchell, lead internet analyst for Goldman Sachs, presented to a group of around 100 internet and mobile media company CEOs that Lightspeed pulled together last week.

There is clearly near term gloom. Goldman is projecting internet advertising revenue to be flat in 2009 in the US, and to see just 4% growth world wide. However, Mitchell showed that there is still plenty of long term headroom for growth in the internet advertising market. He pointed out that in the US, internet advertising represents around 8% of all advertising today, and this could as much as double over time:

Experience overseas leads us to believe that as Internet penetration, broadband penetration, smartphones and mobile access, and general comfort with the Internet grow, so too will online advertising as a percentage of total advertising.

For example: Online advertising is 17% of total advertising in Korea, with search comprising 11% and display & other making up 6%. Korea reached 50% broadband penetration in 2001, when search advertising that year was about 2% of the total ad market. The US took until 2005 to reach those levels.

Similarly, in the UK, online advertising is 13% of total advertising. In the US, online was only about 8% of the total at the end of 2008. We believe that the US and UK will catch up with Korea, and that the rest of the world will gradually converge with developed Internet economies.

Further, we believe that the transition to online will occur more quickly in developing markets such as China, as advertisers “leapfrog” traditional forms of advertising and begin advertising solely or primarily online.

Search and Display internet advertising as % of total: US vs Korea

He speculated that online advertising share of all advertising could reach as high as 23% if a scalable advertising solution for social media could be found.

Clearly, the companies that make it through to the other side of this advertising recession will have plenty of growth left ahead of them.

(For more from Jeremy, visit his blog)