NEW YORK—It was only a matter of time. A new report predicts that U.S. online advertising spending will contract in Q1, according to a recent story on AdAge.com. This could be the internet advertising industry’s first contraction in ad spending since the bubble burst in 2001.

A study by global IT market data firm IDC reports that U.S. fourth quarter internet ad sales results have been far worse than originally estimated, with an increase of only 0.4%.

While search ads grew 10% year-over-year in Q4, classified and display ads have dropped 18% and 7%, respectively.

Karsten Weide, IDC's director for digital media and entertainment, says U.S. online ad spending will slow in the first quarter, and perhaps the second.

"Even in the last quarter, search growth was only barely able to offset losses in display and classifieds," said Weide, in a released statement. "In the current quarter, while search ad revenue growth will not collapse, it will slow. Display and classified ads will most likely show worse negative change rates in first quarter 2009 than in fourth quarter 2008. All in all, we believe U.S. internet advertising revenue could contract by as much as 5% in first quarter. And things may get worse in the second quarter." Contact: www.idc.com; www.idc.ca