US Internet Advertising in 2005 Grew 30% Over 2004, and Newspapers Can Take Heart Their Web Sites Got About 16% of the Total, About Nine Times More Than TV Station Web Sites

The Internet Advertising Revenue Report released by the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers says that total US Internet advertising in 2005 totaled $12.5 billion – an all-time high. Such a figure needs to be put in perspective – it represents only about 5% of all US advertising revenues, up from 4% the year before.

But since the total advertising spend usually grows by no more than 5% annually, and with Merrill Lynch forecasting a 27% increase in Internet advertising for 2006, then obviously that Internet money must be redirected from more traditional forms of advertising, and it appears television more than any other medium is getting hit the hardest.

Television in fact is getting hit on all fronts. Not only are major advertisers redirecting their spend but networks are actively streaming primetime shows on the Internet for free the day after their terrestrial broadcast, advertising sponsored, making it less necessary to catch the primetime broadcast. Only now are the networks making deals with their affiliates that they somehow benefit from the new revenue streams.

And whereas newspapers are working hard to build their multi-platform approaches to deliver a total product, television has for some reason lagged behind.

Newspapers got around $2 billion of that total $12.5 billion for advertising on their local sites. There is a definite trend that while newspapers are losing readers to the Internet – particularly younger readers – many Internet users go to their local newspaper site for local news and information.

If newspapers were to get their sales and marketing act together and start promoting their print and web sites as one entity, they would be able to show that instead of print circulation going down in fact overall readership is going up.

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Is There A Correlation Between Internet Advertising Increasing 22% in 2005 While National Newspaper Advertising Dropped 4.7%, And That Some 50 Million Americans Now Turn to the Internet For Their Daily News Fix?
As broadband Internet access increases so will their users turn to the Internet for their daily news requirements, according to significant US research. And since 37% of adult Americans now have broadband compared to 10% four years ago, is it just coincidence that advertising revenue growth for traditional media fell last year while on the Internet it soared 22.3%?

The Good News For Newspapers Is that More People Than Ever Before Are Reading Their Online News Sites. The Bad News Is that One of Their Major Advertising Sectors – Automotive – Is Moving Much Of Its Spend to The Web, Too, But Not Necessarily To Newspaper Sites
US newspaper web sites continued to attract web crowds in record numbers during Q4, 2005 as some 35% of all active US web users spent time on a newspaper site. But that is about the only thing newspapers can find to celebrate, and with print circulations still in decline, and revenues basically flat there is now the added dose of bad news that newspaper classified automobile advertising has taken a nosedive, and all the signs are things will get worse, not better.

Hollywood Blames Failure of Newspaper and Television Advertising For Its Box Office Slump. Threatens Diverting Advertising to Where the Young Congregate – The Internet
Hollywood is going through its worst slump in some 20 years, and the problem, according to the movie moguls, is not that their films are bad – a matter of opinion -- but rather the hundreds of millions of dollars they are spending on newspaper and television advertising are being wasted on age demographics that don’t go much to the movies.

Movie Box Office Numbers are Down Adding One More Media Woe
Movie studio advertising is really big business for newspapers and television. Open the movie section of a major metropolitan daily newspaper on a Friday and Saturday and usually there are pages and pages of studio ads touting their latest releases, let alone all those ads on television. But not as many as last year -- movie studios cut their ad spend by a whopping 11.2% in Q1, 2005.

US Newspaper Internet Sites Grew 2004 Advertising By 26.7%; Print Newspaper Advertising Rose by 3.9%. Which Do You Think Is the Growth Market?
For those newspaper publishers searching for double-digit advertising growth opportunities in 2005 they need look no further than their own web sites. Statistics released by the Newspaper Association of America showed record advertising revenues for US newspaper Internet sites in 2004 of $1.5 billion.

But while many local television stations do have their own web sites their web activity pales behind that of newspapers – TV web revenue is about nine times less than newspapers.

And that gets really hard to understand when television is the perfect cross-platform media. Americans still say that television is their number one purveyor of news and information, and television is an easy medium to tell verbally tell viewers frequently that they can easily find more information on a variety of subjects right on their own web site, yet Americans still flock to newspaper web sites instead.

Borrell Associates recently issued its 2006 report on the local online advertising market. The good news was that TV stations more than doubled their 2005 online revenue from the year before ($283 million from $119 million) and CEO Gordon Borell believes there will be a 45% increase in 2005 to $410 million, but that is still one-fifth of what newspapers make today.

Borrell told a recent meeting of television executives that local television has a “tremendous opportunity” to change its Internet ways. “All media are in flux, and flux is a great time to institute change,” he said.

Television in particular needs to get deeply involved in new media whether it be the Internet for news and information, mobile phones, on-demand video, streaming, and so on. If ever an industry is going to be affected by the new rules – the viewer will watch programming on the medium of choice at the time most convenient to the viewer -- then television must adapt. The days of the primetime captive audience are almost over, and the advertisers seem to realize that more than do television executives.

Greg Stuart, IAB chief executive, put it bluntly when issuing this year’s report. “Given that advertising is growing at 5% and new media is growing at 30%, the other media are absolutely losing share. The targeting is better on the Internet, given the ability to identify purchasing moments. Marketers spend an awful lot of money telling traditional media they don’t know what their ads are doing. With the Internet, they know exactly what’s going on.”

The basic new fact of life is that there is no longer a mass US audience. It is being split into many different parts and advertisers are searching for new, cost effective ways of reaching such diversification.

The only thing really saving traditional media today is that advertisers still find new media a bit suspect, but each year the new media spend goes up and it is only a matter of time until the traditional spend comes crashing down.

And as they say, “If you can’t fight them, join them” Newspapers have been somewhat successful at adapting to the new circumstances, but television still lags behind.

About 100,000 television executives from around the world are convening in Las Vegas this week for the annual National Association of Broadcasters convention. Hopefully many of them will find some time away from the gambling tables to see, hear, and learn what needs to be done to make money on the Internet and they take that information back to their stations.