Merrill Lynch announced that Q4 online ad revenue will increase 30 percent, up from a previous estimate of 27 percent, MediaPost reported.

Earlier this week The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers LLP announced that internet advertising revenues reached an estimated new record of $4.2 billion for the third quarter of 2006.

Merrill Lynch estimates that paid search will grow 27 percent and forecasts branded ads to grow 21 percent.

"We estimate search will account for 42-43 percent of online advertising spend next year, continuing to take share of the total online pie, up from 41-42 percent this year," says Merrill Lynch Research Analyst Lauren Rich Fine.

Last month Merrill Lynch announced that General Motors (GM) is planning to spend more media dollars on digital.