JP Morgan internet analyst Imran Khan is lowering his online ad spend forecast into next year due to the worsening economy.  Sensing that marketers are becoming more conservative with their ad spend, Khan expects that long-tail advertisers will shift toward performance-based advertising forms. Therefore, display ads will suffer more than search. And so, JP Morgan is lowering its ‘08 US display market estimate to $8.2 billion from $8.6 billion— or 14 percent year-over-year growth, versus its previous call for 20 percent growth. Looking to ‘09, the analyst is dropping its projected display forecast to $9.4 billion from $10.0 billion (representing 16 percent growth compared to his prior estimate of 17 percent gains.)

—Search gets slightly more attractive: As for search ad spending, despite the overall tightening of marketer’s online ad budgets, much of this effect offset by the market share shift towards ROI-rich performance-based ads. So JP Morgan’s search outlook is being dropped only slightly. Khan now estimates growth this year will be 27 percent from the previous projection of 32 percent. With the economy expected to improve somewhat next year, Khan is expecting only a modest slowing in search ad gains with 26 percent year-over-year growth.

—Comparable to others’ changed outlook: The estimates are largely in line with other forecasters’ recent downward revisions, including Carat (23.3 percent global ad spend growth this year, with 18 percent gains in ‘09); Cowen (16 percent for ‘08 in the US from its previous projection of 19 percent); Magna’s Bob Coen (12 percent gains this year compared to his earlier prediction of a 16.5 percent rise over 2007);  TNS (looking only at US display, which grew 8.5 percent in Q1, down from 16.7 percent in Q107); Lehman Brothers analyst Doug Anmuth (online growth in the U.S. expected to be up 23 percent, versus his previous call for a 24 percent increase). ZenithOptimedia has so far remained on the optimistic side, maintaining its expectation for global internet ad spend to grow 26.7 percent this year.

—Gulf between search and display grows: Before the economy began to deteriorate earlier this year, display was expected to narrow the ad spend gap with search. A WSJ piece highlights the impact of search and display’s diverging course, with the beneficiary being Google (NSDQ: GOOG). Yahoo (NSDQ: YHOO) and Microsoft (NSDQ: MSFT) had hoped display would be their ticket to catch up to Google. But with search ad dollars set to hit $10.4 billion this year—double the amount for display, according to research firm eMarketer—Google’s position is only strengthened by dint of its 70 percent hold on the search market. Search’s share of total online ad revenues is expected to rise to 42 percent by the end of ‘08, a slight uptick from last year’s 40 percent share, eMarketer says. Meanwhile, display’s forecast is flat with a 21 percent share of all online ad spend this year. Still, display isn’t dead by any means, as it’s projected to end the year up 15.6 percent with $5.2 billion this year from $4.5 billion in 2007.

• Carat’s Still Bullish On Online Ad Spend, But Total Forecast Revised Slightly Downward
• Internet Ad Spend To Pass Broadcast By 2011, Despite Slowing Economy: VSS
• Cowen Lowers Online Ad Outlook, But Remains Bullish On Search And Google
• Magna’s Coen Revises Online Ad Spend Forecast Downward; Sees 12 Percent Gain In ‘08