Banc of America Securities said it continues to believe that the Internet "is in the midst of a multi-year share grab of ad dollars, with Yahoo! (nasdaq: YHOO - news - people ) and Google (nasdaq: GOOG - news - people ) poised to be among the biggest beneficiaries."
On the newspaper side, Banc of America said that companies with the strongest franchises and "more-national exposure" will see Internet-advertising revenue approach 10% of total ad revenue over the next two years, but some of that growth will come at the expense of the print side.
"Given the secular shift toward the Internet and away from newspapers, we remain bullish on the Internet sector as an investment and cautious on the newspaper group as a whole," the research firm said. Banc of America's top pick in the Internet space is Yahoo!, which it rates at "buy" with a $43 price target. Its favorite stock in the newspaper space is Dow Jones (nyse: DJ - news - people ), which the firm rates at "buy" with a $43 price target.
The research firm analyzed data from Advertising Age's special report on the 100 leading national advertisers to quantify the pace of advertising share shift to the Internet away from newspapers. Banc of America focused on the top national ad categories: automotive, retail, telecom/Internet, financial services, general services, entertainment, travel and media.
Ad dollars continue to shift into non-traditional advertising cable TV, Internet and Spanish-language media, away from newspapers, TV, magazines, radio and outdoor, "although perhaps more slowly than conventional wisdom might suggest." But Banc of America noted that the shift to the Internet will be slow. Total Internet industry advertising increased by 21.4% in 2004, which is more growth than any other advertising medium, but that growth was off of a small base of only $6.1 billion and still only accounts for 5.3% of total U.S. measured advertising revenue, according to TNS Media Intelligence.
"While today's ad dollars being spent on the Internet in aggregate appear relatively small, we note that if Internet advertising grows at a 15% to 20% rate over the next decade, it would reach the ad dollars spent on newspapers, or approximately $35 billion (starting with 2004 dollar amounts and assuming low-single-digit growth in newspaper advertising over the same time period)," Banc of America said.
