• by Mark Walsh  @markfwal, May 6, 2008

A faltering economy isn't dimming the long-term outlook for online growth. More than half of media and entertainment executives expect digital advertising to surpass traditional ad revenue in the next five years.

That's according to Accenture's 2008 Global Media Content Survey, in which 62% of executives said digital content would be monetized by a variety of approaches including search, sponsorships and performance-based advertising.

The projections mark a big leap from today, when the Internet today accounts for less than 10% of marketing budgets overall. And the Accenture report suggests media bosses may be overestimating how well prepared they are for the digital era.

Two-thirds of the 100 senior executives surveyed across media have less than 40% of capabilities required to take advantage of the new digital market-the same level as last year, Accenture found.

"There clearly remains a huge effort to put in place the necessary capabilities, and it is apparent the size of the task is still not fully understood," said Gavin Mann, digital media lead for Accenture's media and entertainment practice, in a statement.

Among the required capabilities are a shared view within organizations on intellectual property rights, integrated management of digital assets, and a royalty management system that can track new revenue streams.

Even so, the consulting firm said that 2008 might be seen as the year digital media shifted to a more mainstream category, with companies such as Disney and NBC each projecting more than $1 billion in interactive ad revenue.

Executives envision revenue coming through several key sources over the next five-years including multi-platform distribution (across TV, online, mobile), short-form video, and social media and user-generated content.

Most executives view the explosion of Web 2.0 online communities as more than a passing fad and 57% expect to reap significant revenue from social media in the next three years. Further, 71% said they don't perceive any risk in letting their brands be associated with social sites.

That seems odd, considering the reluctance of companies such as NBC and Viacom to distribute programming on YouTube and other video-sharing sites for fear of copyright infringement.

In any case, almost two-thirds expect advertising to be the primary business model in five years, with 25% citing subscription-based services, and 11%, pay-to-play.

When it comes to mobile, the forecast wasn't quite as bullish. More than half (55%) of media industry leaders believe mobile media will gain a mass audience in three years while 45% think it will take longer. Barriers to faster growth include a lack of consumer receptiveness, uneven service quality and a lack of readiness among mobile content providers and wireless operators.

This year, executives plan to spend the bulk of their digital budgets (59%) on Web portals. That proportion, however, marks a steep decline from the 77% last year and reflects the ongoing shift of ad dollars from the likes of Yahoo, AOL and MSN to social networks and more narrowly targeted sites.

The balance of interactive spending will be spread across social networking portals (15%), user-generated content (5%), video-on-demand (5%), mobile media (4%), in-game advertising (3%) and other outlets (8%).