The more sobering projections extend through 2012 when eMarketer envisions $37 billion being spent on U.S. online ads. That figure represents a drop of $13 billion, or 26 percent, from the 2012 estimates that eMarketer drew up in August.

Since then, the global economy has been rocked by the United States worst financial crisis since the 1930s. The turmoil has included the collapse of big banks like Washington Mutual Inc. and Lehman Brothers, triggering a steep decline in the stock market despite huge U.S. government commitments aimed at restoring order.

The rescue plan hasnt been enough to prevent mass layoffs and home foreclosures either, pushing the U.S. economy toward its most severe recession in more than 25 years.

The pain increasingly has been hurting technology companies that had been viewed as safe haven until recently.

Both analysts and investors reasoned high tech would hold up better than most industries because corporate customers would still want to buy computers and software that helped automate their operations. Meanwhile, advertisers were supposed to be still spending money freely online in hopes of connecting with the Internets expanding audience.

But those perceptions have shifted as more technology companies have acknowledged the tough times are crimping sales. The downturn has prompted already-weak companies like Sun Microsystems Inc. and Yahoo Inc. to resort to mass layoffs, but even stalwarts like Internet search leader Google Inc. are pinching pennies.

Investors already have been bailing out of technology stocks, including Googles, which has plunged by 41 percent since mid-September. Googles stock price fell $4.99 Monday to close at $257.44, near its lowest levels in 3 1/2 years.

EMarketers new advertising estimates represent an even bigger comedown from another projection the firm made in March. Back then, eMarketer predicted Internet ad spending in the United States would hit $30 billion for the first time in 2009.

Although its not as optimistic now, eMarketer still expects the Internet ad market to grow by 9 percent next year. That would represent a slowdown from an 11 percent increase projected by eMarketer for this year.

Google should remain the biggest beneficiary because its system for showing ads next to search results is expected to remain an effective marketing vehicle.

EMarketer predicts U.S. search ads will rake in $12.3 billion next year, up slightly from its August estimate of $11.9 billion.

If eMarketers projection proves accurate, it would represent yet another blow to Yahoo Inc., which is more dependent on display ads. Yahoo shares gained 82 cents to finish Monday at $10.21, but that price is still near the lowest levels since early 2003 – a funk that prompted founder Jerry Yang to agree to step aside as the companys chief executive when a replacement can be found.

Source: wimar