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The online video advertising market, seen as a key source of new revenue for Google Inc. (GOOG), won't grow as quickly as previously forecast and most of the growth will be fueled by traditional TV players, according to a new report.

Advertisers are expected to spend $699 million on online video ads in 2009, up 32% from $531 million spent last year, according to a new forecast by Brian Wieser, global director of forecasting for Magna, a unit of Interpublic Group of Companies Inc.'s (IPG) Mediabrands division.

Wieser said video advertising will likely outpace growth rates for most other online ad formats, but the new forecast nonetheless represents a notable downward revision from last summer, when Magna said online video ad spending was expected to rise 45% to $805 million this year.

The downward revision, while not surprising given current economic conditions, is a setback for the Mountain View, Calif.-based search giant, which has recently struck deals with big studios such as Sony Corp. (6758.T) (SNE.N) and Disney to post professional content such as films and TV shows on YouTube in a bid to attract more advertising dollars.

Google's core search business hasn't been immune to the recession, and the company is under growing pressure to generate additional revenue from its wildly popular YouTube site, which it purchased for $1.65 billion in 2006.

A Google spokesperson wasn't available to comment.

Shares in Google ended Monday trading down about 0.91% at 385.95.

The Magna report said wider availability of premium network and cable TV programming and increased broadband penetration, would partially offset the impact the recession was having on overall ad budgets.

Wieser also noted that most of the growth in online video advertising over the next few years would be driven by traditional TV content providers, such as Time Warner Inc.'s (TWX) CNN, Walt Disney Co.'s (DIS) ESPN, and Hulu, a premium video site jointly owned by NBC Universal (GE) and News Corp. (NWS)

"Over the next few years, we expect traditional TV content, and traditional TV suppliers, will continue to account for the bulk of online video budgets," said Wieser.

Wieser noted that traditional advertisers are still reluctant to be associated with the user-generated videos common on YouTube, but he said Google's content deals should help to position the company over time to compete in the online video market.

-By Scott Morrison, Dow Jones Newswires; 415-765-6118; scott.morrison@dowjones.com