Online advertising to become largest advertising segment surpassing newspapers

By 2011, Internet advertising is expected to become the largest advertising segment, surpassing newspapers for the first time, a new study reported Tuesday.

The same study predicts overall communications spending to top US$1 trillion in 2008, making it the third-fastest-growing sector in the U.S. economy, just shy of government and agriculture.

The forecast comes from the "VSS Communications Industry Forecast 2007-2011," an annual report published by the private equity firm Veronis Suhler Stevenson, which has published the report for 21 years.

"We are in the midst of a major shift in the media landscape that is being fueled by changes in technology, end-user behaviors and the response by brand marketers and communications companies," said James Rutherfurd, executive vice president and managing Director at VSS.

"We expect these shifts to continue over the next five years, as time and place shifting accelerate while consumers and businesses utilize more digital media alternatives, strengthening the new media pull model at the expense of the traditional media push model," he noted.

Consumers are increasingly turning to the Internet, video games and cable or satellite TV at the expense of newspapers and free broadcast TV, VSS reported.

On average, the time consumers spent on the newer media jumped 19.8 percent from 2001 to 2006, while time spent on traditional media declined 6.3 percent over the same period.

Surprisingly, for the first time since 1997, consumers spent less time with media in 2006 than they did the previous year -- a 0.5 percent decline. The drop in consumer media usage was driven by the continued migration of consumers to digital alternatives for news, information and entertainment, which require less time investment than their traditional media counterparts, VSS reported.

For example, consumers typically watch broadcast or cable television at least 30 minutes per session, while they spend as little as five to seven minutes viewing consumer-generated video clips online; however, VSS expects consumer media usage to stabilize in 2007 and increase slightly through 2011, reports.

In 2010, that would put overall online ad spending at $54 billion, overtaking print-only newspaper advertising as the largest advertising category, which is expected to stand at $51.5 billion that year.

At the same time, the study also predicted rapid growth in the amount of digital advertising

that newspapers would take in, jumping from $3.2 billion last year to $7.7 billion in 2010.

As of 2006, ad-supported media still had a 53.8 percent share of the total amount of time people spent with media, compared with 46.2 percent on for-pay media, which include the Internet, cable and satellite TV, movies seen in theaters, books and recorded music.

At the same time, the study found that the total amount of time spent on all types of media actually declined slightly last year for the first time since 1997, dipping 0.5 percent to an annual total of 3,530 hours.

Leo Kivijarv, vice president of research at PQ Media, a media research consulting firm that worked on the report, said the slight decline came after several years of growth amid rapid adoption of new kinds of hardware and services such as high-speed Internet connections, satellite TV and digital video recorders.

With many of those services now already purchased by those who want them, Kivijarv said that time spent with media had reached a saturation point, the AP reports.

Source: agencies

Prepared by Alexander Timoshik

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Author`s name Alex Naumov