Times are tough down under. Embattled traditional media outlets in Australia are being beaten in the struggle for advertising revenue by online media companies.

Where once classified advertisements were rivers of revenue that sustained print titles for almost two centuries, they are now more commonly found at specialist sites that are presenting a serious challenge to newspaper’s position in the advertising market.

According to the Commercial Economic Advisory Service of Australia, 2012 is the first year in which online ad spend in Australia overtook that of newspapers. The dominance of new media companies focused on the sale of classified ads online, in particular Carsales.com, recruitment site SEEK, and real-estate site REA, contributed greatly to the change, which saw the online market receive 27 per cent of the country’s total advertising dollars. Newspapers attracted 24 per cent.

Reuters reports that the shift in advertising dominance from traditional media to online companies is a relatively new phenomenon in Australia. As recently as April the value of traditional media organisations was greater than that of online companies, but in the intervening months the worth of newspaper outlets and television broadcasters plummeted.

Digital media brands have experienced impressive rates of growth at the same time that news publishers in Australia have been forced to cuts jobs and close printing presses. While the companies that own the websites Caresales.com, REA and SEEK have a combined market worth of roughly $6.2 billion, Fairfax News and Media – Australia’s oldest and largest media company – posted losses of $2.732 for the financial year 2012 after a $3 billion write-down of its media businesses. News Ltd, News Corp’s Australian publishing arm, found itself in a similar position at the end of the financial year, having written down the value of its assets by $2.8 billion.

Looking to the future, executives at publishing companies are predicting that the weak state of the advertising market will continue to affect profits well into next year. Speaking to The Australian, News Corp’s chief operating officer Chase Carey admitted that “overall this [publishing] segment is essentially expected to be flat in 2013,” due to falling advertising revenues.

Traditional media companies are making efforts to catch up with the digital transition and attract online ad spend, but have yet to establish their digital ventures as reliable sources of revenue. At the beginning of this week, Fairfax revealed a new iPad app for The Canberra Times, to go with the apps it released over a year ago for The Age and The Sydney Morning Herald. However, as highlighted by the Talking New Media blog, the apps have little financial value from a publishing perspective. For the time being, no subscription is required to access the content, which for the most part is taken from the websites of the respective publications, and none of the apps carry advertising. Though it is believed that a paywall will eventually be introduced, requiring consumers to subscribe on a monthly or yearly basis, the slow process of monetising digital ventures is indicative of the struggle traditional news outlets have faced in attempting to update their business model and operations.

The digital-only firms that are currently thriving in the Australian advertising market have the rather obvious advantage of being made for the online world. Newspapers on the other hand are required to restructure and resize – a process that take time and money at a time when most news organisations have little of either resource to spare.

In a speech at PANPA’s Future Forum conference in Sydney, Fairfax’s Gary Linnell gave an insight into Australian publishers’ often difficult relationship with digital media. As traditional news companies attempt to “sprint out of the blocks trying to make up for 10, 15, 20 years of absolute […] blissful ignorance… the entire industry”, Linnell said, “is trying to work out whether or not the escape tunnel we’re trying to dig into the digital world will be big enough for all of us to get through.”

Sources: Reuters, The Australian (1) (2) Talking New Media