Posted 11/25/08 at 10:19:27 AM by Paul Lilly

While websites continue to look for ways to increase online ad revenue, analysts are cautioning that advertisers are starting to cut back their budgets. According to a research note by analyst Jeff Lindsay of Sandford C. Bernstein & Co., the advertising industry is only expected to grow 11 percent in the U.S. in 2009 and 9 percent worldwide, down from a previous estimate of 13 percent. But even 11 percent seems overly optimistic to Jim Friedland of Cowen & Co., who downgraded his previous forecast of 13 percent to only 3 percent.

While Friedland's outlook is particularly bleak, he notes a decline in online display advertising, a trend which he sees continuing as ad budgets are tightened. Yahoo has already witnessed the decline first hand and last month reported a 64 percent drop in net income for the third quarter, which Jerry Yang mostly attributed to a weakening online ad market.

One entity that looks poised to weather the storm is Google, a major player in paid-search ads, which Friedland predicts will grow in the low double digits.

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