Online ads to overtake US newspapers

By Aline van Duyn in New York

Published: August 7 2007 05:03 | Last updated: August 7 2007 05:03

The rapid growth of online advertising is expected to see the sector overtake US newspaper advertising in terms of size by 2011.

The forecast comes against a backdrop of declining advertising sales reported by newspaper groups this year in spite of continued strength in the US economy.

The findings are from a widely-watched annual research report on the media sector by Veronis Suhler Stevenson (VSS).

In the 2007 study, published on Tuesday, VSS forecasts that online advertising will grow by more than 21 per cent per year to reach $62bn in 2011, making it bigger than newspaper advertising, which is expected to total $60bn in 2011.

Broadcast television and cable and satellite television combined will continue to take the biggest share of advertising dollars, and are forecast to reach $86bn in 2011. “The path of online advertising and newspaper advertising is a continuation of what we’ve been observing for many years, but it is finally getting to the point where the lines will cross,” said James Rutherfurd, managing director at VSS.

The shift in advertising spending from traditional media to online and digital alternatives is taking place across the globe. Already, some forecasters expect newspaper advertising to be overtaken by online spending in the UK and Sweden this year.

The VSS forecasts also illustrate the lag between changes in consumers’ behaviour and advertising spending.

The survey also measured the time spent on different media, and in 2007 the amount of time spent reading newspapers is expected for the first time to be overtaken by time spent online.

Indeed, the shift to digital media has led to a slight decline in the overall amount of time spent consuming media.

In 2006, media usage per person per year declined half a percentage point to 3,530 hours. The study found that while people typically watched television for at least 30 minutes per session, they tended to watch user-generated video clips on the web for five to seven minutes.

The use of media in the workplace increased, however, up 3.2 per cent to 260 hours per employee per year, VSS found.

Spending by companies on information and media, including business-to-business magazine and trade shows, is also increasing, up 8.1 per cent in 2006 to $227bn.

“Knowledge and information industries drive the US economy, meaning that information is a critical tool,” said Mr Rutherfurd.

“Companies are prepared to pay a lot of money to get that information.”