Conventional Wisdom Might Be Wrong

The conventional wisdom is that the growth of Internet, Web and mobile advertising will come at the expense of legacy media. Certainly there is evidence that major advertisers are strongly considering a shift to online and niche media as the impact of national TV network and cable network ad buys drops (in part because of TiVo and other personal digital recording platforms, which allows users to skip past commercials entirely).

And everybody "knows" that some media formats, such as newspapers, are declining at the expense of newer forms of media. Which logically leads one to conclude that some formats are "toast." But the numbers don't necessarily suggest this is the case. Aggregate newspaper industry revenues unaccountably have risen over the past couple of decades. Of course, one has to adjust for inflation, and these figures aren't inflation adjusted. Still, the numbers are striking and counter-intuitive.

The point is that some media segments that compete with online, Web and mobile might see cannibalization of existing revenue streams as some business moves online. What seems not captured by analyst forecasts is managerial response. Managers of "declining" businesses might respond more cleverly than some might give them credit for, so that there is both replacement and augmentation of the existing revenue streams.

To be sure, Interent advertising continues to grow sharply. It is the fastest-growing segment of media, no doubt. What isn't so clear is the degree to which Internet advertising supplements, and to what degree replaces, existing ad spending. It is conceivable, in other words, that total advertising might grow, even as shifting occurs, and even after factoring in inflation. Right now that's an open question.