NEW YORK: Smartphones, micropayments and the shift of TV advertising budgets to the web will all contribute to reshaping the online landscape in the US, a report by Citi has argued.

According to the financial services giant, US internet ad revenues will rise by 14% in 2010 on an annual basis, to $27 billion (€19.7bn; £17.9bn), taking the medium to an overall share of 11%.

This will follow on from a modest expansion of 1% in 2009, but is a downward revision from Citi's prior prediction of 20% growth, due to the "severe macro headwinds" that have impacted the industry.

Google's share of online adspend will remain largely static, at an estimated 45.4%, with Yahoo experiencing a decline of 1.2%, to a share of 16.8%.

More specifically, Citi's analysis suggested nearly 1% of advertising spend "migrated online" in the last 12 months, a slightly slower rate of change than was witnessed over the previous two annual cycles.

However, positive factors that are set to be at work this year include "top-down" trends, with total advertising expenditure rising by 3%, leading to a similar shift in budgets to the net as in 2009.

Search will enjoy an improvement of 15%, taking it to 47% of all internet advertising revenues, with display up by 13%, and taking a third of returns.

Banner ads will register a leap of 12%, with online video up by an even more substantial 30%, and the potential of this latter format is one area that gives Citi "confidence" in the web's prospects for 2010.

Furthermore, there is currently a "wide gap" between the amount of time people spend on the net and the share of media budgets this channel takes, which will need to be redressed at some stage.

Similarly, opportunities remain to draw off funding from direct marketing, newspaper ads and Yellow Pages, which are collectively worth some $120bn.

The increasing number of people using their mobile phones to access the internet could be another "major new growth driver" going forward.

Smartphone unit sales climbed by a third in the US in 2009 – compared with a contraction of 18% for all other devices – and an uptick of 30% is also expected in 2010.

These phones reached a 20% penetration rate last year, allowing comparisons with the explosion of broadband uptake from 2001–04, which attracted large numbers of brands and consumers to the net.

While TV has been "relatively unscathed" by the rise of the web thus far, Citi also posited that this situation "appears to be changing."

"More TV and premium content are offered online, and advertisers are starting to shift some dollars from TV to online advertising," the company argued.

Finally, "microtransapption", or small transactions and applications, will act as a fresh stream of income for web operators.

Zynga, the company behind Farmville, the most popular game on Facebook, is due to generate $400 million in revenue in 2010, with Tencent, a Chinese portal, posting $500m in "small app" sales.

"As more companies take advantage of the internet (and mobile internet) for these micro transactions, we believe this market will provide a new avenue of growth for the internet sector," Citi said.

Amazon, Google and Priceline were among the firms it tipped to have a strong year, but eBay and AOL may find conditions more challenging.

Data sourced from Citi