Online advertising will be bigger than newspaper advertising in the United States by 2011, according to a new forecast by Veronis Suhler Stevenson, a private equity firm for the media, communications, information, and education industries.

In its annual media research report, VSS expects total Internet advertising to reach $61.98 billion in 2011, surpassing newspapers as the nation’s largest ad medium to include pure-play websites and digital extensions of traditional media. This is based on a projection that money going to online ads will grow by over 21% each year for the next four years.

In comparison, the report predicts newspaper advertising will be worth $60 billion.

Despite this shift, television, cable, and satellite will continue dominating all U.S. advertising budgets; the forecast for these markets is expected to reach $86 billion in 2011.

Alternative Advertising Segments

VSS notes that spending on alternative advertising — including Internet, mobile, videogames, and digital out-of-home — grew 36.6% to $26.53 billion in 2006 whereas traditional advertising spending grew 2.4% to $183.21 billion in 2006. The largest drop in traditional media was in print-based newspapers, yellow pages, and consumer magazines.

Spending on alternative marketing — including branded entertainment, interactive marketing, and e-custom publishing – increased 17.3% to $61.67 billion in 2006 whereas spending on traditional marketing (i.e., direct mail, promotions) grew only 5% to $192.34 billion in 2006.

“We are in the midst of a major shift in the media landscape that is being fueled by changes in technology, end-user behaviors, and the response by brand marketers and communications companies,” said James Rutherfurd, VSS executive vice president, in a statement.

VSS projects the fastest-growing media segments over the next five years will be pure-play Internet and mobile services, branded entertainment, out-of-home media, outsourced custom publishing, and public relations.