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Strong Internet spending boosts traditional media

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While Internet and mobile services are one of the fastest-growing segments of the media industry—with communications spending projected to increase 14.7% in the next five years—the fastest growth within the sector is coming from traditional media companies, according to a report released last month by Veronis Suhler Stevenson.

Despite increasing media fragmentation, traditional media companies have positioned themselves to capitalize on the surge in online ad spending. Some of the old lions of the media industry, such as Dow Jones & Co., Forbes and the New York Times Co., have been aggressively developing Internet strategies to protect their brands against the rush of online media companies.

Spending on Internet and mobile advertising, marketing and paid content through traditional media companies is expected to total $25.57 billion this year, up 26.1% over 2005. Traditional media companies will account for 45% of total spending on Internet and mobile services this year, up from 16% in 2000, according to VSS' "Communications Industry Forecast 2006-2010."

According to the report, total communications spending in the U.S. will reach $961.90 billion this year, up 7.2% from 2005. By 2010, that number will reach $1.24 trillion.

Marketing services was the largest and fastest-growing communications sector in 2005, with spending rising 9.1% to $310.00 billion. The sector is expected to rise at a five-year compound annual growth rate of 8% to $456.00 billion in 2010, fueled by growth in direct response media, event marketing and custom publishing.

B-to-b media spending is expected to grow 6.3% to $23.69 billion this year and reach $30.17 billion in 2010.

While growth in b-to-b print media and trade shows is expected to remain in the low-to-mid single digits, b-to-b e-media spending is projected to grow 28% this year, to $2.40 billion.

Meanwhile, b-to-b e-media spending is expected to post a compound annual growth rate of 21.4% between 2005 and 2010, and will reach about $5.0 billion in 2010. Spending on digital media climbed 27% to $1.87 billion in 2005.

"All the buzz is about e-media and online programs, but let's not forget about the amount of money being spent on trade magazines and events," said Tom Kemp, a managing director at VSS and former chairman-CEO of Penton Media. "The excitement isn't in print, but it's still the foundation for most b-to-b marketing programs."

Nevertheless, VSS said, the tremendous growth in e-media spending, driven by the Web's ability to generate sales leads and measure ROI, will continue to put pressure on print advertising spending and erode print circulation.

Kemp said the future growth in e-media spending should benefit b-to-b marketers' efforts to get their messages out faster and more effectively. "B-to-b marketers' ability to use TV, radio and billboards is limiting," he said. "But with e-media programs, they can segment their audience more so than they can in a print product."

The growing demand for online advertising through both traditional media companies and pure-play Web companies fueled total advertising spending this year, which is expected to grow 6.4% this year to $210.29 billion following a 4.3% boost to $197.59 billion in 2005.

Total newspaper spending, including print, online and mobile, is projected to edge up 1.5% this year to $67.76 billion. However, with more marketers shifting their ad dollars to online properties, spending on print dailies is expected to rise at a compound annual rate of just 0.2% from 2005 to $58.69 billion in 2010.

Spending on professional and business information services is expected to increase 8.2% this year to $135.35 billion, driven by the desire among b-to-b companies to acquire hard data. Spending on such services is forecast to reach $181.90 billion by 2010.

Trade show spending is expected to increase at a compound annual rate of 5.8% from 2005 to 2010, when it is projected to reach $12.89 billion. The trade show industry struggled in the wake of the 9/11 terrorist attacks, but in the last few years has bounced back to provide b-to-b media companies with healthy profit margins.

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