Online Advertising to Surpass Newspaper Advertising by 2011

Forecast: Internet Expected To Exceed All Other Ad Media By 2011

Private equity and investment firm Veronis Suhler Stevenson (VSS) put out a new ad spending forecast, covered in MediaPost and the Financial Times. Driven by audience migration, the US Internet is anticipated to capture $61.98 billion and become the top ad medium in 2011. Traditional media will show slow, low single-digit growth while alternative media will grow at a compound annual rate of 17.4 percent during the forecast period.

According to the MediaPost write-up of the VSS findings, consumers are spending less time with media overall and less time with "push" vs. "pull" media in particular:

At the same time, the consumer migration to digital media--which require less time investment than traditional media counterparts (think 3-minute YouTube clips versus 30-minute TV shows)--has spawned a year-over-year decline in the amount of time consumers spent with media, VSS researchers say. The tally came in at 3,530 hours in 2006, a per-capita decrease of 0.5%. It's the first time since 1997, researchers say, that such a behavior has occurred.

Consumers are also migrating away from ad-supported media and spending more time with media they support, according to the VSS Forecast. Consumers spent an average of 1,631 hours in 2006 with consumer-supported media, such as the Internet and video games--a gain of 19.8% compared to 2001. Time spent with ad-supported media, such as broadcast television and newspapers, has fallen 6.3% since 2001 to 1,899 hours per person.

While forecasts are often inflated and make assumptions that don't come to pass as quickly as expected, VSS claims its forecasts are historically very accurate:

The VSS Forecast also features the industry’s most accurate spending forecasts, producing a margin of error of +/- 2% for 9 of the last 10 years. The margin of error for the 2006 forecasts was + 0.4%.

VSS projects paid search will reach roughly $8.7 billion by year end and $16.7 billion in 2011. The report also projects roughly $6 billion in local search and online yellow pages spending by 2011. All locally targeted online ad spending is expected to reach just over $19 billion by 2011.