Out with the old media...
Media executives at Brainstorm debate just how big online advertising will become and who will grab the biggest piece of the market.
ASPEN (CNNMoney.com) -- The good news for traditional media companies is that despite the notion that they are a dying breed, many have taken the right steps to embrace the online world.
But the bad news is that the "new media" may not turn out to be as lucrative a business as television, radio and print. That, at least, is the opinion of Sir Martin Sorrell, group chief executive of WPP, one of the world's largest advertising agencies.
Speaking at a panel on the topic of new vs. old media at FORTUNE's Brainstorm conference Wednesday, Sorrell said that Internet upstarts are pressuring the profit margins of older media firms.
He said a company like online classified ad firm Craigslist, for example, makes it difficult for newspapers to charge as much as they used to for classified ads. And he doesn't think the newspaper business is the only area of the media facing such challenges.
"Traditional media models: network TV, print and magazines are threatened," Sorrell said. "We have to get comfortable with a reduction in profitability."
Sorrell estimated that only about 7 percent of the total global advertising budget is spent on online ads. But he said that he could see that number approach 20 percent within the next few years. So as more dollars move online, there is a greater potential for larger media company's profits to get squeezed.
Geoffrey Sands, a director with the media and entertainment practice of consulting and research firm McKinsey & Company, agreed that it is becoming more difficult for "old" media companies to thrive in a world that suddenly is a lot more competitive.
"Media planning has become an incredibly complex enterprise," Sands said. "Now you have a planning exercise that involves dozens of different alternatives."
MySpace chief executive officer Chris DeWolfe said that he's even begun to notice advertisers engaging in a manner similar to the TV "upfront," where marketers buy up ads in advance of the fall season.
DeWolfe said that several blue-chip advertisers have approached MySpace about locking in ad purchases for pages tied to upcoming movies.
Old, new? There's no difference
Still, other executives on the panel disputed the notion that "new" media would overtake "old" media. Michelle Guthrie, the chief executive officer of STAR, a leading Asian media company that is wholly owned by News Corp., said it was not fair to label media companies as being "old" or "new."
"Most media companies now are not old media or new media. They're just media," she said. "Advertisers want online and traditional brand exposure."
As such, even Google (Charts), a company that is often cited as being one of the key drivers of technological change in the media and advertising world, has expressed interest in more mature forms of the media sector.
Google has acquired a privately held firm called dMarc Broadcasting, which will allow the company to place ads on radio. And speaking during the Brainstorm panel, Marissa Mayer, Google's vice president of search products and user experience, stressed that Google also is looking to expand into the world of placing print ads for customers.
"We have a large network of advertisers and they have come to us because they want us to help them find well-targeted leads. And we recognize that there is more than search," she said.
And Sorrell conceded that "old" media firms aren't at risk of becoming obsolete as long as they recognize that they need to have a presence in all aspects of the business.
"You can't be just a newspaper company. You can't be a magazine company. It is all becoming blurred," he said.
FORTUNE is owned by Time Warner, which also owns CNNMoney.com. The writer of this story owns shares of Time Warner through his company's 401(k) plan.
Related: Complete coverage of Brainstorm.