Merrill Lynch on Thursday raised its online ad forecast for 2006, based on the release of data earlier in the week by the Interactive Advertising Bureau (IAB), and sounded a bullish note regarding 2007.

Online advertising revenue in the fourth quarter is now forecast by Merrill Lynch to grow 30 percent, up from a previous estimate of 27 percent, reports MediaPost. For all of 2006, growth is now forecast at 23.3 percent rather than the previous estimate of 22.5 percent. Merrill said ad revenue in the first nine months of 2006 was up 35.5 percent versus the first three quarters of last year; it had forecast a 31 percent increase.

Merrill Lynch said it expects paid search to grow 27 percent in 207 and branded ads to grow 21 percent. It projects that search will account for 42-43 percent of online advertising spend, up a percentage point from this year.

Merrill also said it is likely to up its online ad spend forecast for 2007 as a result of the emergence of online video ads.