From yesterday's Red Herring:
For those who thought online advertising had peaked, it turns out there’s still some climbing room at the top.
Investment bank Pacific Crest released a report Thursday saying that online advertising will accelerate in the second half of the year.
Online advertising hit $8.4 billion in 2004, according to Jupiter Research. Analysts at Pacific Crest estimate the market grew in the range of 25 to 30 percent in the first quarter, and expect it to grow at the same pace in the second.
For the second half of the year, they believe online advertising will beat those numbers.
Part of the reason for this growth is that online advertising has become more accepted, as traditional advertisers have integrated it into their marketing campaigns. And new advertisers are coming aboard, as search companies offer programs targeting small and mid-sized businesses.
“Search is dominated by mid-sized businesses,” said Steve Weinstein, an analyst at Pacific Crest. “In terms of numbers, it would have to be small businesses” that are new advertisers.
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The report says growth in international markets will surpass growth in the United States. At this point, international markets generate more than half the search volume and one-third of revenue.
Much to the advantage of Google and Yahoo, those who had expected paid search to decelerate this quarter have been proven wrong. Mr. Weinstein had also anticipated that the law of large numbers would kick in.
“You can’t compound these kinds of growth rates forever,” said Mr. Weinstein.
But at this point, the law certainly isn’t kicking in. Pacific Crest estimates Yahoo’s second quarter revenue should be in line or better than its expectation of 45.3 percent revenue growth to $884.4 million.
Google will also probably beat expectations again, with the bank projecting that net revenue would range between $834.4 million and $877 million in the quarter.
