Murdoch finds a general to drive his internet dream

Rupert Murdoch has been a phenomenal innovator in the media industry for decades. But, by his own admission, he missed the internet after the excitement of the late 1990s died down.

That is, until April last year, when he found the internet religion. This week he promoted an executive to spearhead the new mission, Mr Murdoch's declared aim of "transforming" the company into a "global digital powerhouse".

Jeremy Philips will head News Corp's internet strategy and investments, as executive vice president, reporting directly to the chairman, Mr Murdoch. The 33-year-old Mr Philips, who has worked for McKinsey, is an Australian who was vice-chairman of the internet business ecorp until it was sold to the Packers.

Mr Murdoch said in a speech in April that he and others in the industry had been "remarkably, unaccountably complacent", unable to see that around them, there was a "revolution" going on in the way young people access news and consume media.

Since then, his News Corp media empire has spent $1.4bn (£800m) on internet acquisitions as it has tried to make up for lost ground. The amount of money thrown around by Mr Murdoch led the advertising guru Sir Martin Sorrell to suggest that what we were seeing was "panic" buying of online companies "willy nilly".

Mr Murdoch told investors at the company's annual general meeting in October that "our aim is nothing less than to provide the best and stickiest internet experience available anywhere".

He added: "Why the urgency? Because the internet is the fastest growing advertising market. It has the fastest growing audience. More importantly, broadband proliferation is at last real, meaning the opportunity is now to grow exponentially the distribution of our vast video content in news, sports and general entertainment."

In the UK, the company's News International national newspaper business has been beefing up its online presence. And BSkyB, the pay television company 37 per cent owned by News Corp that has spent billions building a satellite delivery network, finally conceded that the internet represented an alternative. Last year it bought the internet service provider easynet for £211m. Sky had spent the previous few years lampooning anyone who suggested that the internet represented a threat.

In a recent interview, Mr Murdoch said: "You start putting two and two together, and we decided to abandon our defences and get offensive." In his speech to US newspaper editors in April, he noted with "alarm" that there had been a collapse in the value that consumers aged between 18 and 34 placed in newspapers' trustworthiness and usefulness. In the Carnegie Corporation study he cited, just 4 per cent of respondents from this age group thought newspapers were entertaining.

News Corp has paid some $500m apiece for MySpace.com, a fast-growing networking site for teenagers, and IGN, which has a collection of online games and content aimed at young men. It also bought Scout.com, an independent online sports network.

There will almost certainly be many more internet deals to come, so Mr Philips will be busy. News Corp bid unsuccessfully for the voice-over internet company Skype last year - it went instead to eBay in a multibillion-dollar deal - and Mr Murdoch has expressed interest in acquiring the giant internet service provider AOL, should owner Time Warner put it up for sale.

Mr Murdoch told the US business magazine Fortune: "The more we think about it [the internet], the more it fits into our whole modus vivendi, our philosophy, for the last 40 years, which is more choice. The internet is almost the ultimate way of giving people choice."

Not all media companies abandoned significant internet investment after the dot.com bubble burst in 2000. The various websites owned by Time Warner, Viacom and Disney make these companies' assets among the most visited internet destinations in the US. News Corp is a long way behind in its internet presence versus other media business, let alone dedicated internet players such as Yahoo and Google.

In the UK, the newspaper and television industries are abuzz with a renewed enthusiasm for internet investment, as evidence accumulates of advertising money migrating to the internet and of consumers spending more time on the web. ITV bought the social networking site Friends Reunited for £120m late last year, while newspaper groups such as Trinity Mirror and Daily Mail & General Trust have snapped up sites that attract classified advertising in sectors such as property and recruitment.

According to Nielsen/NetRating, consumers in the UK spend 16 hours and 31 minutes a month on average browsing the web, while in the US the figure is 28 hours 55 minutes. That is time spent not reading newspapers or watching television.

Yet the actual advertising spend on internet sites remains small compared with television or newspapers, though it is ahead of outdoor (billboards) in markets such as the UK and the US. The proportion of advertising dollars spent on the web does not come anywhere near reflecting the amount of time consumers spend surfing the internet.

Mr Murdoch's solution for old media is a "complete transformation", so that newspapers, for instance, interact with readers rather than handing down the news from on high.

News Corp is now working on integrating the websites it has bought with its existing sites and developing a common navigation tool that will allow users to move back and forth between them.

Rupert Murdoch created a fourth US television network, introduced pay TV to the UK and broke the Fleet Street unions. He is late to the internet game, and much of the value and advertising revenues online will centre around searches, an area where News Corp is unlikely to have a major presence. But few would bet against Mr Murdoch, even at 74, forging a successful internet business.