Old media increase share of online ads

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Traditional US media companies are increasing their share of the fast-growing online advertising sector relative to internet rivals such as Google and Yahoo, according to a new study.

In one of the first detailed reports of the relative positions of traditional media companies and their online competitors, Veronis Suhler Stevenson, the private equity group, has shown that, contrary to many people’s expectations, media companies are holding their own in the digital space.

VSS will report on Tuesday in its annual comprehensive study of the media business that this year, of the $22bn expected to be spent on online and mobile advertising in the US, traditional media groups’ share is forecast to be 37 per cent, up from 23 per cent in 2000.

By 2010, when internet and mobile advertising is due to reach $44bn, traditional media companies are expected to capture $17bn, or nearly 39 per cent, of the total.

James Rutherfurd, managing director at VSS, said: “There has been a lot of handwringing about media companies not making any money in the online world but what the data show is that their position is better than we would have assumed. Traditional media firms have worked hard at finding ways to extend their reach online, and this is paying off.”

Media companies such as Time Warner, News Corp, General Electric’s NBC Universal, CBS, Viacom and Walt Disney as well as newspaper groups such as The New York Times and Dow Jones are all making digital expansion a priority.

High-speed internet connections have made possible use of the web as a real alternative source of information and entertainment. In addition, widespread use of social networking sites such as MySpace has increased the time younger people especially spend online. YouTube, a video-sharing site, has become a top online destinations in less than 18 months.

Many media companies, recognising the potential of the internet to disrupt their traditional businesses, have made, or are considering making, acquisitions to boost their web activities. Rupert Murdoch’s News Corp has been the most aggressive, spending nearly $1.5bn and acquiring MySpace last year.

Although the websites of newspapers, television broadcasters and cable channels are attracting viewers, traditional advertising spending in many of these sectors is either barely growing or declining.

It is still not clear whether traditional media companies will be able, in the longer term, to make as much money from online audiences as from their traditional audiences.

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