Ad Shift to Internet Continues, But Slower Than Some Think

By: Jennifer Saba Though top advertisers are moving their dollars away from traditional media and to the Internet, the shift is slower than previously suggested, said a new report from Banc of America Securities.

The research firm looked at 100 leading national advertisers focusing on those companies that spent over $1 billion with newspapers. The categories include: automotive, retail, telecom/Internet, financial services, general services, entertainment, travel, and media. Of the top 100 advertisers, 48 made the analysis.

The report found that, indeed, more than one-third of ad dollars flowing out of newspapers are moving to the Internet. The 48 advertisers spent roughly the same in 2004 as in 2003 on newspaper advertising; however, they upped their Internet spend by 29%.

Yet, the shift is happening sporadically. Of the eight categories examined, the Internet gained share in only three of them. Telecom advertisers shifted the largest share from newspapers to the Internet. Retail came in second and general services came in third. Entertainment was the only category where newspapers gained over the Internet.

Banc of America is quick to point out that while Internet growth is advancing, the base is low. Internet advertising only accounts for 5.3% of total U.S. measured advertising revenues, or $7.4 billion. Newspapers accounted for 21% of total U.S. measured advertising spending in 2004, or $29 billion. Additionally, the report takes into account newspaper Web sites, which fall under the Internet sector (as opposed to traditional media).

?Internet advertising would have to grow 15% to 20% year over year the next 10 years to reach the ad dollars spent on newspapers, or approximately $35 billion,? said the report. In 2004, total Internet advertising increased 21.4%.

The report also finds that larger ?more sophisticated? advertisers are embracing the Internet and that they understand the medium's ROI capabilities.