Traditional media companies are

increasing their share of online advertising budgets

at the expense of big internet players such as Yahoo! and Google, according to research by New York-based private equity firm

Veronis Suhler Stevenson

(VSS).

The company says conventional US media outlets, which secured just 16% of the online spending pie in 2000, are now in a position to capitalise on a surge in broadband video advertising, music and game downloads and mobile marketing services.

It predicts web and mobile advertising will increase by 26% to $25.6bn by the end of this year, with traditional media companies accounting for 45%.

If one word could describe the media business in 2006 it would be fragmentation,” said James Rutherfurd, executive vice president and managing director at VSS.

Never have there been so many media options available to advertisers and consumers, a trend that has both excited and frustrated brand marketers as media buying decisions have become more complicated by a market veering toward new media. But traditional media companies have responded by investing in multiple media platforms to reach this increasingly fragmented audience.

The research suggests ‘old media’ firms, which have generally struggled to keep up with user trends on the web, are placing a greater priority on digital services – and that spending is paying off.

According to VSS, internet and mobile spending associated with traditional media properties is the fastest growing part of the web industry.

The question for the newspaper groups, as reported by analyst group Outsell recently, is also whether web advertising will make up for declining paid circulation revenue and lost earnings from print ads.