• by Ross Fadner , Joe Mandese  @mp_joemandese, February 24, 2004

The term "wired" has long been used to describe the Internet, but now the online medium can truly claim to be America's most wired. According to soon-to-be-released estimates compiled by the stats-keepers at Web researcher eMarketer, the Internet has surpassed the U.S. household penetration level of cable TV.

Exactly when this tipping point occurred isn't clear, said Geoffrey Ramsey, CEO and founder of eMarketer, who made the startling conclusion in recent weeks and has begun circulating it among a small group of Internet insiders, but based on his analysis of a variety of sets of research data ranging from comScore and Nielsen//NetRatings to the Pew Research Center, UCLA and Harris Interactive, eMarketer now estimates U.S. household Internet penetration is about 67.9 percent. That compares with a 65.8 percent U.S. household penetration level for cable, according to an eMarketer analysis of Nielsen Media Research and U.S. Census data.

More significantly, Ramsey noted that while cable TV penetration has essentially been flat at about 66 percent of U.S. households, online penetration continues to expand.

"Wow," said Jes Santoro, vice president-director of integrated media at Earthquake Media, a media shop that buys traditional and online media, upon learning of the online penetration milestone from MediaDailyNews. "I think it is very significant. But it's symbolic as well."

"It's symbolic because it speaks to people's media consumption habits," he explained. "Think about cable, you kind of have to have it to have it to get TV reception. It's almost like a utility. But with the Internet, people go out and get it because they want to use the Internet."

eMarketer's Ramsey agreed, noting that it was similar household penetration milestones that first got cable TV on the map with Madison Avenue during various junctures in cable's history.

That should be a "wake-up" call to the ad community, said Greg Stuart, president of the Interactive Advertising Bureau, which is looking at ways of promoting the milestone to the ad industry.

Not everyone agrees with the statistical symbolism, of course.

"I'm just wondering why it's relevant to anyone? If you're talking about cable networks, you have to talk about cable-plus [satellite/alternative delivery systems]. That's what online is competing with and that's what national advertisers are buying when they buy cable networks," pointed out Ira Sussman, senior vice president-research at the Cabletelevision Advertising Bureau. Sussman's point is that when satellite and other delivery systems are added into the mix, the major cable programming networks actually reach more than 80 percent of U.S. households, giving the medium of wired and unwired "cable" TV greater coverage than the Internet.

"It's an interesting statistic," said Sussman, of the Internet's penetration milestone, "but it's a little like saying [cable TV] is bigger than Reader's Digest. What does it really mean?"

Sussman also noted that cable ironically is pushing Internet distribution via the deployment of broadband cable modem lines, a development that some believe may lead to the fusion of television and online applications via broadband video.

Most significantly, he said that while penetration levels are important, it is actual time spent with a medium by consumers that translate into the audience impressions bought by Madison Avenue. And in that regard, cable still beats online media by a wide margin.

According to the summer 2003 edition of Veronis Suhler Stevenson's annual Communications Industry Forecast, the average person in the U.S. will spend 976 watching cable TV services in 2004, while the average person will spend only 182 hours online. Based on a total of 3,732 hours per person spent with all measured media, that gives cable a 26.2 percent share versus a 4.9 percent share of total consumer time spent with media this year.

But the IAB's Stuart claimed even those statistics may be misleading, because the quality of time spent with each medium is different.

"I think we need to be really careful about time spent on television. There's research that shows as much as 50 % of TV viewers aren't even paying attention to the advertising. So it's not real time spent. Whereas Internet time spent is real time spent. It's the difference between a lean-back medium like cable and a lean-forward medium like the Internet," he said.

Online Tops Cable Penetration, Lags Time Spent

                         Online    Cable 
Penetration:              67.9%    65.8%      
Share Of Time Spent:
4.9%    26.2% 

Source: Online penetration = eMarketer estimates. Cable penetration = Nielsen Media Research estimates. Share of time spent by consumers using consumer media = Veronis Suhler Stevenson's Communications Industry Forecast.