In its first forecast of the year, Zenith upgraded its forecast for interactive advertisers, saying it will account for 12.3% of the ad market this year, up from 11.5%.

•    Zenith once again substantially increased its forecasts for Internet advertising:
o    Internet ad expenditure by 2010 is forecast to reach $67 billion (up from $61 billion in the previous forecast) and account for 12.3% of the ad market (up from 11.5%).
o    Online video and local search are now generating substantial new revenues; in the slightly longer term, behavioral targeting on social-networking sites is expected to provide fruitful opportunities to advertisers.

•    Some of the Internet’s growth is coming at the expense of newspapers:
o    Newspapers are forecast to grow only 4% over the forecast period. After adjusting for inflation, this equates to a 5% decline in expenditure.
o    Advertising on newspapers’ websites is included in internet advertising and is helping newspaper publishers claw back some of their lost revenue.

•    Cinema and outdoor are the only media apart from the Internet to be gaining market share:
o    Cinema is growing rapidly in the US, where it is still quite new, and is benefiting from the spread of digital distribution technology, which is reducing production costs and allows advertisers to run time-sensitive campaigns and target local areas more easily.
o    Digital technology is likewise enhancing the value of outdoor to advertisers, as is contractors’ investment in research and improvement of non-digital displays.
Zenith downgraded its combined growth forecasts for North America and Western Europe to 3.8% from 4.4%, blaming the credit crunch and ebbing consumer and business confidence for the slowdown. But Zenith upgraded its forecasts for the rest of the world to 11.1% from 10.9%.

Other key highlights from Zenith’s report:
•    Developing market dynamism will maintain global ad growth above 10-year average despite sluggish growth in the developed world.
•    Developing markets will contribute 63% of ad expenditure growth between 2007 and 2010, and increase their share of the global ad market from 27% to 33%.
•    Asia Pacific will overtake Western Europe in 2010 to become second-largest ad market.
•    Internet will account for 9.7% of world ad expenditure this year and 12.3% in 2010

Zenith’s Top 10 contributors to global adspend growth from 2007 to 2010:

Country         Growth (US$million)         Growth (%)
USA                   14, 812                                        8.3
China                9,242                                          61.5
Russia              8,248                                           92.1
U.K.                   4,541                                           19.5
Brazil               4,520                                          46.6
India                3,163                                           52.2
Japan               2,347                                           5.7
South Korea  2,095                                           21.6
South Africa  2,095                                          21.6
Pan Arab         1,987                                           54.2

Even with the Olympics and the presidential election the advertising market in general is doing poorly –sub-prime mortgages, credit markets, the price of gold and housing meltdowns are all to blame – but online hasn’t been affected.

Interactive advertising will grow to about $28 billion this year and account for 8.8% of ad spending in the U.S.

eMarketer’s breakdown of U.S. Online and Total Media Advertising Spending
(Billions and % of total media spending):

Online     Total Media     Online % of total media
2006:  $16.9         $281.6                     6%
2007:  $21.1         $283.9                     7.4%
2008:  $25.9         $293.3                    8.8%
2009:  $30            $299                       10%
2010:  $35            $307                       11.4%
2011:  $41            $316                        13%
2012:  $51            $332                       15.4%

“Whatever label you slap on the current economic climate, US ad spending both online and offline will be shaped by overarching business trends,” says David Hallerman, eMarketer Senior Analyst and author of the new report, US Online Advertising: Resilient in a Rough Economy.

“While Internet ad spending is in no way immune to a recession’s impact, it is more resistant to ad spending cutbacks than are other media.”

Yahoo Inc. today filed a presentation for its investors that details its three-year financial plan and strategic initiatives which are expected to just about double the company’s operating cash flow from $1.9 billion to $3.7 billion and generate $8.8 billion in revenue in 2010 (excluding traffic acquisition costs).

The report was originally presented to Yahoo’s board in December of 2007, a more innocent time, shortly before Microsoft publicly started circling around the company.

Some key points:

• Display and video advertising are expected to bring in $1.9 billion in added revenue ex-TAC over the next three years.
• Yahoo expects its growth to outpace the currently anticipated market rate of growth in online and display advertising.
• Search revenue is expected to bring in $1.4 billion in added search revenue (growth in line with anticipated market-wide growth).

Investors were impressed: in recent trading, Yahoo’s stock rose to $27.53 a 6.5% boost.