Internet to Replace Newspapers As Largest Ad Medium in 2011

The results of private equity and investment firm Veronis Suhler Stevenson’s (VSS) 21st Communications Industry Forecast released on Tuesday, August 7th, projects that Internet advertising will be the nation’s number one advertising medium in just four years. Media Post covers the report in detail and I recommend you read their overview of the study for the raw data. However, for this tip I’ve decided to present a brief picture of the online advertising and marketing landscape of 2011 according to VSS and other recent studies.

Saying goodbye to print newspapers?

By 2011, VSS reports that advertisers will spend more money on the Internet than on newspapers and the study shows that local advertising on newspaper websites will see a 31.1% boost in 2007 with an estimated $3.3 billion in spending and by 2011 an estimated $8 billion in spending. In a great September 2006 article by Blogcritics Magazine columnist Haydn Shaughnessy titled “Ten Things That Will Happen to TV and Newspapers,” Shaughnessy writes on the fate of newspapers and news media by 2011.

Newspapers will have a much reduced physical presence on newsstands and on shop counters as they deploy their online strategies and will realise belatedly that physical distribution gave them the kind of presence only the milkman and the baker dreamed of. The result will be a much reduced influence in their new online role.

As all information will be free to the end-user, everybody in news production will have to go to the advertiser-pool for every cent that it takes. News bureaux around the world will close and the authoratitive “source” will become the local blogger-pool.

What you know will become more a case of what can you believe and who else believes it too. Confusion and uncertainty will have an impact on social and political life.

It’s hard not to see these somewhat bleak predictions coming true based on where the majority of advertiser dollars will be heading in the next few years. In addition, VSS notes that consumers are spending less time with ad-supported media like newspapers, radio, and magazines (down 6.3% since 2001) and more with consumer-supported media (CGM) like videogames, Cable TV, recorded music, books, home video, video games and the internet (up 19.8% since 2001). Can you say advergaming and product placement?

The shift of local consumer internet advertising dollars to TV, radio, and local magazine web sites also bears out Shaunessy’s predictions. The VSS forecast shows the highest growth rate for ad spends will be TV sites, 38.1% and radio sites 34.8%. Local search 34.5% and local magazines 32.9% also show high growth rates.

The continued rise of Social Media

If newspapers, radio, and broadcast TV lose their authority in the hierarchy of media sources then we’ll begin to see the true results of Web 2.0 in that world news, information, and facts will become consumer generated content (CGC). This is supported by the VSS projection that Social Network Advertising and Blog, Podcast, and RSS Advertising will see enormous gains by 2011. MySpace, LinkedIn, Facebook and the like will see a compound annual growth rate of 51% by 2011*, and the blogosphere which VSS predicts a 151.5% increase in spending from 2006 - 2007, will have a CAGR of 70.9% to 2011. If the numbers are correct, companies will no longer be able to avoid social media advertising if they want to be competitive.

Keyword search advertising still going strong

As for other types of online advertising including search, display ads, email, and classifieds nearly all spends will double over the next four years with the exception of sponsorship. Total spend will reach a tremendous $38.897 billion by 2011.

Keyword search advertising isn’t slowing down either with the second highest CAGR (19.8%) after referrals (or lead generation advertising) (19.8%) and right in front of email (19.4%).

The changing online advertising and marketing landscape

“Leading national advertisers have accelerated their diversion of dollars from traditional print and broadcast media to alternative digital platforms to combat media and audience fragmentation, increased consumer control and multitasking, and the growing impact of advanced technology on conventional media models. The result has been the extraordinary growth of alternative advertising and marketing,” says James Rutherford, executive vice president and managing director at VSS.

With the predicted communications spending to exceed $1 trillion in 2008 driven primarly by alternative media strategies, what kinds of changes can we expect in the Internet industry in the next few years? I think we’ll continue to see offline media shift focus solely online and I wonder if we’ll even see one of the major newspapers actually cease their print publication services? Pure-play internet companies will become ferociously competitive as more and more advertising dollars fill their coffers. Finally, today’s search industry leaders will continue to wage battles, however I fully expect to see another major search player enter the arena in the next few years.

Sources: Veronis Suhler Stevenson, PQ Media, Borrell Associates, eMarketer, Interactive Advertising Bureau, Simba Information, Harris Nesbitt

* Data licensed exclusively to Veronis Suhler Stevenson from PQ Media’s Alternative Media Outlooks 2007.

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