Report: Newspapers Losing the Most Ad Dollars to the Internet

By: Jennifer Saba Newspapers are losing the most ad dollars to the Internet compared to other media, according to a new report from Wachovia Equity Research.

Wachovia Senior Analyst John Janedis and his team analyzed 100 leading national advertisers to determine the shift away from traditional media to the Internet. Specifically, the team looked at 55 of those advertisers that fell in the following categories: automotive, retail, telecommunications, financial services, general services, media, and tech/Internet.

Of those seven categories, only one -- financial services -- increased spending in newspapers. Television, the study noted, actually experienced the opposite trend with four of the seven categories including telecommunications, automotive, media and tech/Internet, increasing the amount of dollars spent the medium.

Looking at the seven categories collectively, newspapers lost 14.3% in advertising dollars in 2006 while TV gained 4.4%. The Internet experienced a rise of 17.8% in spending while ad spending on other measured channels fell 1.1%.

Telecommunications advertisers shifted the most out of newspapers. In 2005, the top advertisers in that category spent 31.6% on newspapers while in 2006 they spent only 24% in newspapers.

Newspapers felt this shift with the automotive category as well. In 2005, auto advertisers spent 9.2% of the budget on newspapers. In 2006 spending slipped to 4.6%. The research noted that TV was the benefactor of these dollars.

Retail was much less dramatic. Advertisers in that category spent 29.8% on newspapers in 2005 and 28% in 2006. However, Wachovia pointed out that of the 16 companies they studied in the retail category, Macy's had the largest share shift out of newspapers from 66.1% in 2005 to 60.3% in 2006.

Wachovia estimates that Internet advertising would have to grow 15% per year over the next decade to reach the ad dollars spent on newspapers (or about $35 billion). But that scenario doesn't have to play out in order for the Internet to "have significant impact on the advertising industry as a whole," wrote Wachovia analysts. "It's already having an impact."


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