Study projects dramatic shift of ad spending to online sites

13 11 2009

In a study presented today at the Yale Law School Conference on the Future of Journalism, two leading analysts of media economics say there is a wide gap between the ratio of adults who get their content online and the amount of ad spending online, and that gap is about to close. The implication for legacy news providers is dire.

Today, U.S. advertisers spend 8 percent of budgets online, while Americans consumer 30 percent oftheir content online.

If history is any indication, a more appropriate re-allocation of advertising dollars will occur in the not-too-distant future, and daily print newspapers, with declining readership and household penetration, are mostly likely to be losers.

Over the next five years, the authors say, traditional news organization must take the following steps to survive:

  • Shed legacy costs as quickly as possible
  • Re-create community online — in an attempt to regain pricing leverage
  • Build new online advertising revenue streams to replace the loss of traditional print categories

The authors are Penelope Muse Abernathy, who holds the Knight Chair in Digital Media Economics and Journalism at the School of Journalism and Mass Communication at the University of North Carolina, and Richard Foster, a former McKinsey & Company executive who is a now senior faculty fellow at the School of Management at Yale.

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