Ad dollars flood Web, but will they go far enough?

By Paul Thomasch

NEW YORK (Reuters) - Companies will spend a record $31 billion this year to advertise everything from toothpaste to home loans on the Internet, supporting countless news sites, social networks, video exchanges and blogs.

But some media veterans worry that expectations for online advertising may be getting out-sized.

Increasingly, they say, too much media depends on advertising as the only source of revenue. With new players from software makers to cable operators also trying to cash in, the dollars simply may not stretch far enough.

"I'm getting to the point where I feel like every answer to every business development pitch is 'We're going to be advertiser supported'," said Beth Comstock, president of Integrated Media at NBC Universal, which this year set up a fund to invest in media and digital companies.

"It's just not going to be possible," she said at a recent advertising conference. "There are not going to be enough advertising dollars in the marketplace. No matter how clever we are, no matter what the format is."

NBC Universal's television networks, cable channels and Web sites compete for advertising dollars with everything from niche blogs to big media peers like Time Warner Inc and Walt Disney Co. In addition fast-growing Internet companies like Google Inc are snatching up advertising budgets.

But new rivals are entering the market. Comcast Corp., the largest U.S. cable operator, expects at least $1 billion in online advertising in the next five to six years.

Verizon Communications and AT&T are looking at advertising opportunities on their video and wireless services, while startups like social network Facebook are seen as a new frontier for Web marketing.

Even Microsoft Corp has made a bold move into advertising with its purchase of Web marketing firm aQuantive.

THE MONEY FLOW

Until recently, the focus was squarely on how much money is moving into online advertising, rather than whether too many companies are making a grab for it.

There is little doubt today that a hefty portion of advertising dollars will shift to the Internet from TV, radio, print and elsewhere in the coming years. ZenithOptimedia forecasts that online ads worldwide will rise 28 percent in 2007, while the rest of the market grows at 3.7 percent.

Next year, ZenithOptimedia forecasts it to rise by 21 percent, and climb another 13 percent to $43 billion in 2009.

At that point, Web advertising would represent almost 10 percent of the $495 billion spent on advertising worldwide -- yet would trail spending on newspapers, magazines, and TV.

"There are billion of dollars that can still move," said Craig Lambert, Chief Digital Director of Colangelo, an integrated marketing agency based in Darien, Connecticut.