Merrill Lynch, which last week upgraded Google to "buy" from "neutral" based on its strong first-quarter results, says that soaring performance augurs well not only for the search giant but also the online ad industry, MediaPost reports. Merrill analyst Justin Post wrote in a report that Merrill Lynch's 2006 forecast of 28 percent growth in U.S. online advertising seems "too conservative," now that Google itself is forecast grow 57 percent year over year.

"We expect Google's advertising share growth to continue, and Google's innovation is expanding the online ad market," Post wrote. "Google is not just a share growth story. Better targeting of advertising on the internet is making internet usage time more valuable."

Merrill Lynch also forecast that Google shares will reach $540; Goldman Sachs and Lehman Brothers, too, projected a $500-plus share price.