Google is just the beginning. The Internet is finally reaching its potential as a selling machine. And advertising will never be the same.
By Daniel Gross

(FORTUNE Magazine) – From the moment consumer-products companies started placing ads in mid-19th-century newspapers, mass-media advertising has been about making connections. But while the modern world knits itself ever more closely together, advertising is becoming increasingly disconnected--from its historical base, its business models, and its audiences. Thanks to the Internet, advertising is going through its first true paradigm shift since the advent of television half a century ago. As a result, your average executive in the ad or media business is feeling as lonely and unstable as a 30-foot sailboat with a broken keel foundering in the swells of a Category 2 hurricane. Pass the Dramamine.

Spending commitments for network TV's fall schedule fell slightly during the recently concluded upfront sales period--for the second year in a row. Sales of magazine ad pages are roughly the same as they were in 1998, even though the economy is some 30% bigger. And so poor is the state of newspaper advertising that the Wall Street Journal--long a reliable profit maker--lost money on an operating basis in the first quarter. But the Internet is expected to attract close to $8 billion from national advertisers this year, still fairly modest but up 15% from 2004. So "offline" media companies are redoubling their online efforts, and Madison Avenue is scrambling to cope. "The traditional creative agencies have absolutely lost their way and their relevance," says Joseph Jaffe, former director of interactive media at TBWA/Chiat/Day and author of Life After the 30-Second Spot. Add it all up, and you have the ingredients for a supersized angst-burger. IS ADVERTISING DEAD? wondered the cover of Media magazine in March, self-consciously echoing Time's 1966 cover IS GOD DEAD?

Well, it's not dead yet--the urge to advertise remains an enormous economic force--but it is morphing into forms that patriarchs like David Ogilvy and Leo Burnett would scarcely recognize. Advertisers are spending more than ever. Universal McCann forecaster Robert Coen projects that U.S. advertisers will spend $279 billion this year, up 5.7% from 2004. But much of the growth is occurring far from Madison Avenue. You'll find it in California, on decidedly unchic Amphitheatre Parkway in Mountain View, headquarters of Google, where it speaks the dorky language of search algorithms and text-based ads embedded in e-mail. You'll find it at Yahoo in nearby Sunnyvale, where it has begun to speak the silky patois of brand image and high-concept multimedia campaigns. And you'll find it sooner or later at telecoms like SBC, which are pioneering a form of Internet television that just might save the TV spot. Give it ten years, say the tech gurus, and everything you watch will be high-definition, interactive, and brought to you via the Internet--you'll love it! But today's big ad agencies might not. As descendants of the firms that invented modern advertising, they face the buggy-whip-manufacturer problem: the fact that full-on paradigm shifts are rarely kind to incumbents. In this special report, FORTUNE checks out all those trends to help you make a connection to advertising's bright future. Shades not included. --Daniel Gross