American advertisers will spend 28% more on internet advertising in 2005 than they did last year, forecasts Merrill Lynch in its latest ecommerce report.

But bucking this trend in Q2, were US sites Amazon, eBay and Overstock where ad spending went sequentially downward. Online travel advertising dollars, on the other hand, headed in a northerly direction, according to the report.

Merrill research analyst Justin Post also predicts that Google will increasingly dictate the flow of online advertising - in that the search engine has made it easier for online consumers to comparison-shop. "Greater use of search provides consumers with more choice and pricing information, pressuring gross margins," says Post.

The Merrill report also notes that ecommerce sites operated by traditional retailers are upping the pressure on web-only stores - a trend it attributes to the growing power of vertical shopping search engines such as, Shopzilla and

Says the report: "We believe offline retail competition will continue to pressure online retail industry gross margins as consumers are increasingly using comparison shopping to find attractive pricing."

Data sourced from MediaPost Online (USA); additional content by WARC staff