Spending on online advertising will grow at a slower rate than previously forecast in 2008 and 2009, Jefferies & Company has said.

However, the investment bank noted that the performance-based nature of search engine marketing will help the channel to see strong growth during this period.

In its report, the organisation predicted that spending on search will rise by 26 per cent this year, with growth of 23 per cent likely to occur next year.

Jefferies & Co also said that it expects to see market leader Google expand at a slower rate in the second half of 2008 than that seen in the first half and highlighted the shift towards using search marketing agencies as part of online strategies.

"Search engine optimisation companies seem to be growing in popularity as marketers and agencies use them as a way to increase the efficiency and profitability of their sites at relatively attractive costs, while lowering the spend on other channels," the report stated.

Earlier this month, JPMorgan analyst Imran Khan also lowered his forecast for the display ad sector while emphasising the growing attractiveness of search as a marketing platform.

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