There is trouble ahead for Lycos Europe and T-Online is best positioned to brave negative market conditions, according to a report from a top investment bank.

In a comparative analysis of the leading quoted European portals and internet service providers, ABN Amro concluded all players would steer clear of funding problems except Lycos Europe, which will need to raise additional funding.

The conclusions are based on the assumption the online ad market may fail to pick up in the next few years.

ABN estimates the total Western European online advertising market in 2001 will reach no more than £680m - up from £495m last year.

Of this figure, the UK will reap just £142m.

Tiscali comes out best in ABN's forecast, due to its limited exposure to portal revenues.

The companies to be hardest hit include Terra Lycos and Freenet.

ABN expects Lycos Europe to cut its marketing budgets drastically and experience narrow short-term losses in the face of mounting funding problems.

"The future of the online advertising market has never been as uncertain as it is at present," said Andrew Moffat, author of the Into Empty Space report.

"In addition, the fallout in the dot.com sector and the reluctance of offline companies will put the viability of even the portal business model in doubt," he added.

Despite a largely negative outlook on the growth of advertising revenue growth in Europe, ABN concluded European ISPs and portals were generally undervalued.