What's this? The gelding Radio Advertising is running backwards as the horses head for the 2007 turn and the 2008 stretch? Is it any wonder that it's about to be caught by the sleek young filly, Internet Advertising?
Perhaps you'd best not think of this as a traditional horse race, however. It isn't. At least that's the opinion of eMarketer, a New York research firm that recently added $500 million to its online advertising estimate for 2006. The figure projected by the firm now stands at $16.4 billion, or about 5.8% of the $281 billion total for all media in 2006. But even the revised figure -- along with a higher $17.4 billion level forecast by Forrester Research (Nasdaq: FORR) -- will still fall short of the 6.9% of the total that probably will go to radio, at least according to Interpublic Group's (NYSE: IPG) Universal McCann, which tracks radio.
Nevertheless, expenditures for Internet advertising over the next couple of years are projected by eMarketer to move past the total amount spent for radio spots. Indeed, in 2007, the Internet is expected to account for 6.8% of the total, while in 2008 it currently is anticipated to rise to 8.1%, all while radio's relative share continues to shrink.
But lest you think this is all easy medium-by-medium math, allow me to make it murkier. Google (Nasdaq: GOOG), for instance, a name you'll recognize as perhaps the premier online company, revealed last week that it is permitting some of its existing online advertisers to use its own automated advertising system to broadcast ads on radio stations across the United States. Apparently the ads are running in about 260 metropolitan markets, and are benefiting from the technological capabilities Google acquired with its purchase of dMarc Broadcasting earlier this year.
And in yet another cross-media example, while newspaper newsprint advertising revenues will generally be flat to down this year, online advertising for newspapers will grow -- depending upon the specific paper or group -- at rates well into the double digits. New York Times (NYSE: NYT) is an excellent example: The company's Boston Globe newspaper is witnessing a decline in its advertising revenues, which reached 12% in October, while revenues from Times' Internet advertising, including About.com and NYTimes.com, are expected to expand by about 30%. In the meantime, much of the classified advertising that probably would have been run in traditional newspapers now has leapt beyond the papers' own online units to free sites like Craigslist. It therefore becomes progressively more difficult to determine where advertising ends for one medium and begins for another.
And so the advertising picture brightens for online and clouds for the traditional media. My advice to Foolish investors today would be as it has been in the past: Look to companies that were born of the Internet as your primary investment targets for that medium.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments and questions.
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