The digitalization of the world is proving to be as important a technological change as those wrought by electricity and the automobile, and it is probably still in its early innings.  As people use the ‘Net more, they are reducing consumption of content in traditional media, such as newspapers, television, radio, and magazines, and spending their time, instead, reading stories, watching videos, and networking with friends electronically.  As cellphones become more and more sophisticated, with the industry’s adoption of its third generation (3G) transmission standard last year and the beginnings of the fourth generation (4G) this year, it is now possible to watch television, send e-mail, and listen to music on cellphones.  Beside handsets, new Internet-connected devices permit consumers to listen to music and read books and magazines. 

Use of cellphones is skewed towards younger people. A recent survey by the Pew Research Center found that around 43% of Americans under age 50 regularly get news through their handsets, while just 15% of older Americans do so. And younger users are more likely to use electronic devices to follow sports or entertainment and use social networking sites, such as You Tube, owned by Google (GOOG), Face Book, or News Corp.’s (NWS) My Space.

Newer electronic devices include electronic book readers, such as the Amazon.com (AMZNKindle; the Barnes & Noble (BKS) Nook; and the Sony (SNE) Reader. These and products of less well known firms offer readers mobility and a way to buy books anywhere there is an Internet connection, thus bypassing book stores such as B&N and Borders Group (BGP). Yet more threatening to traditional media may be the new iPad device, by Apple (AAPL).  Some reviewers have described the iPad as a game changer, in that it allows users to read newspapers and other print media, see movies, and perform other tasks that could be done only with a computer attached to a wire just two years ago.

Advertising on electronic devices has grown rapidly; indeed, the Internet was the only medium to post ad revenue gains last year. Google and Yahoo! (YHOO) have run ads for years, and now marketers are seeking to catch consumers’ eyes and ears through the smaller Internet devices. Apple now has around 185,000 ‘’applications’’, or apps, that permit iPhone and iPad users to obtain content from the Internet. By choosing particular apps, users indicate their interests; thus, advertising on iPad apps offers marketers highly segmented populations of likely consumers. And privately held Twitter has just entered the advertising game, offering ads with “tweets’’ for the first time, beginning in April, 2010.

Traditional media are trying to use the Internet to retain as much advertising market share as possible, though much linage has migrated to the ‘Net, never to return. Newspaper companies such as Gannett (GCI), McClatchy (MNI), New York Times (NYT) and Washington Post (WPO) all have websites for their local papers and offer their content over the Internet and on the iPad. Magazine publishers, including Conde Nast, have already inked deals to let readers see their magazines on the iPad. And Hearst is trying to pick up some spare change by creating apps for the new device. Advertising revenues at the traditional media should level out in 2010, and the stronger newspapers and magazines will likely survive, but selling ad space over the ‘Net will not replace revenues lost to cyberspace in recent years.