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The Great Advertising Share Shift: Google Sucks Life Out Of Old Media

[From Silicon Alley Insider] Everyone talks about advertising dollars shifting online, but when you’re fighting all day in the trenches it’s tough to get a handle on what this really means.  Here’s what it means:

US advertising revenue at 4 big online media companies–Google (GOOG), Yahoo (YHOO), AOL (TWX), and MSN (MSFT)–grew by $1.3 billion in Q2, or 42%.  

US advertising revenue at 15 big television, newspaper, magazine, radio, and outdoor companies (Time Warner, Viacom, CBS, etc.) shrank by $280 million in Q2, or 3%.

Put differently, U.S. advertising revenue at all 19 companies increased 8% year over year in Q2, to $13.8 billion ($55 billion annualized).  The online portion of this pie grew from $3 billion to $4.2 billion (23% share to 30% share).  The offline portion, meanwhile, shrank from $9.9 billion to $9.6 billion (77% share to 70% share).  The online companies, in other words, picked up 7 percentage points of market share in a single year.

Other fun facts:

Within our company set, the only traditional media business that grew U.S. advertising year-over-year in Q2 was Outdoor (up 13%). Meanwhile:

  • Television (cable and broadcast) shrank 1%, or $50 million
  • Print (magazines and newspapers) shrank 5%, or $170 million
  • Radio (terrestrial) shrank 7%, or $105 million

Obvious Conclusions

Traditional media executives–especially in the newspaper business–often blame their current woes on “the real estate market” or “cyclical weakness.”   Economic weakness may be exaggerating the downturn, but it’s not the real problem.  Whatever weakness is hitting the newspapers is also hitting Google.

Media power is not only shifting by medium (the handful of Internet companies are collectively valued more highly than most of their traditional media brethren combined), but by geography. Most “big media” companies are still headquartered in New York. Most media power, however, is now headquartered in California.

These trends are secular, not cyclical: TV networks, radio networks, and newspaper companies won’t suddenly wake up one morning and find themselves back in charge.  Individual Internet companies may screw up (see Yahoo/AOL), but if they do, others will rise to take their place (Google).

Traditional media executives are doing a superb job of milking cash flow out of shrinking businesses, but you can’t save your way to prosperity.  The smartest companies acknowledge this and are 1) returning cash flow to shareholders, 2) diversifying via M&A (as the Washington Post has done), and/or investing in or buying promising interactive businesses.


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3 thoughts on “The Great Advertising Share Shift: Google Sucks Life Out Of Old Media”

  1. I did the same thing for Q1 using a few different sources. I doubt the spreadsheet will look very good in comments but you can see that in absolute numbers network and local TV and newspapers are giving it up to Internet and targeted mags and cable channels. Mass Media is dying. Soon to be followed by Mass Marketing.

    MEDIA JAN-MAR 2007 (Millions) JAN-MAR 2006 (Millions) % CHANGE
    NETWORK TV 6,053 6,523 -7.20% 470.5
    LOCAL NEWSP 5,389 5,650 -4.60% 261.0
    SPOT TV 3,744 3,905 -4.10% 161.0
    SYNDICATION 987 1,049 -5.90% 62.0
    B-TO-B MAG 957 1,009 -5.20% 52.0
    RADIO 2,294 2,343 -2.10% 49.6
    NATL NEWSP 810 855 -5.30% 45.0
    SUNDAY MAG 430 439 -2.00% 9.0
    LOCAL MAG 110 114 -3.30% 4.0
    SPANISH NEWSP 83 85 -1.90% 2.0
    FSI 475 475 0.00% 0.6
    SPANISH MAG 36 31 14.30% 5.0
    OUTDOOR 882 861 2.40% 20.9
    SPANISH TV 985 950 3.70% 35.0
    CABLE TV 3,821 3,593 6.30% 228.0
    CONSUMER MAG 5,168 4,825 7.10% 343.0
    INTERNET 4,900 3,800 16.70% 1,100.0
    TOTAL 8 34927.6 35025.5 -0.30% 97.9
    37122.9 36507.7 1.7% 615.2

  2. Henry
    can I just confirm – did you strip out international ad revenues for all companies in the analysis? The internet firms all have big international revenues (less so for AOL) but many of the old media firms are just USA-based. thanks.

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