A pack of new media specialists in Australia has surpassed many of the country's newspapers and television networks in size after diverting away the precious advertising dollars that have sustained the old guard for decades.
Revenues have collapsed at newspapers, and the January-June half of this year was the first time more Australian ad spend went online than it did to newspapers, at 27 per cent versus 24 per cent, according to industry group the Commercial Economic Advisory Service of Australia (CEASA).
A group of traditional media firms, which as late as April was worth more than the main online classified advertisers, has since fallen to less than half the value of the web-based firms.
The combined market value of Carsales.com, online job site Seek and REA Group, which owns realestate.com.au, jumped by 30 per cent to around $6.2 billion in the nine months to early September, and some of the firms trade at forward price-to-earnings multiples of around 20 times.
In contrast, the market value of Fairfax Media, APN News & Media, and Ten Network fell by 45 per cent to around $1.8 billion in the same period, and some are on much lower multiples.
In June, Fairfax - Australia's oldest media firm, whose shareholders include mining heiress Gina Rinehart, Asia's richest woman - said it would cut almost 20 per cent of its 10,000 jobs, shut printing presses, and focus on online distribution.
At the same time News Ltd, the local unit of Rupert Murdoch's News Corp, announced job losses and cost cuts in the face of declining ad sales. Between them, the two firms wrote down $6 billion in value last month.
"What you've seen in the last few months both at Fairfax and at News Ltd has been a sprint out of the blocks trying to make up for 10, 15, 20 years of absolute ignorance, blissful ignorance," Fairfax's metro editorial director Garry Linnell said at a recent forum.
Fairfax, whose Sydney Morning Herald and The Age newspapers date back to the 1840s, was built on the income from classified ads - known within media circles as "rivers of gold".
It spurned several opportunities to invest in digital media firms, including some of today's most profitable names, for fear they would cannibalise those ad revenues.
Carsales.com, Seek and REA are dominant in online classified advertising. In New Zealand, Trade Me Group boasts 2.5 million members in a nation of 4 million.
Hyperion Asset Management says the Australian online classifieds market is less fragmented than that in the United States or Britain, meaning those firms have a freer hand to raise prices.
"They have a lot of pricing power, their earnings are growing by double digits and that shines out in this environment," said Hyperion fund manager Joel Gray.
Hyperion owns 12.5 per cent of Carsales.com, 10.2 per cent of REA, and 11.8 per cent of Seek.
Traditional media - newspapers, TV, radio, magazines - have a 73 per cent share of the overall $13.5 billion advertising spend, down from 83 per cent in 2009, CEASA data says.
Earnings at the digital media firms grew between 22 per cent and 43 per cent in the year to June 30, while earnings declined at Fairfax, Seven West Media, Ten and APN.
In response to falling advertising revenues, Ten and Seven have tapped shareholders with deeply discounted share issues to pay down debt, and privately owned Nine Entertainment is about to be forced into the hands of lenders with a debt load of $3.8 billion.
While newspapers and TV networks cut costs, new media companies are expanding. Carsales.com bought the Trading Post classifieds brand from Telstra, while Seek has taken majority stakes in online job firms in Brazil and Mexico.
Under massive pressure to reduce debt, both Nine and Fairfax have sold stakes in profitable online ventures over the past year, as they were the easiest parts of the business to sell.
Since Fairfax floated a one-third share of Trade Me in December, the stock has risen 43 per cent. Fairfax sold a further stake in June.