JPMorgan cuts online ad spending projections

Display ads are expected to be hit hardest

The economy failed to pick up speed last month, according to the Federal Reserve's Beige book, which captures a snapshot of economic activity. To this end, it's not surprising that analysts are predicting online advertising to grow slower than previously expected. 

JPMorgan this week cut its online advertising forecast for this year and next, with the biggest area of weakness coming from display advertising.

“As advertisers become more conservative with their ad spend, we think that the long-tail advertisers will shift toward performance-based advertising forms. As a result, we see the display-advertising sector being more impacted by economic weakness than search,” wrote Imran Khan, analyst at JPMorgan.

Marketers are now expected to generate $8.2 billion in display ads in the U.S., down from $8.6 billion. This results in a 14% annual growth rate, vs. a prior estimate of 20%.  JPMorgan is also lowering its display ad forecast next year to a growth rate of 16% vs. a prior rate of 17%.

Search advertising is expected to fare a bit better. JPMorgan is lowering its 2008 annual growth estimates to 27%, down from 32%. Search advertising is expected to grow by 26% in 2009.