New media consultant Vin Crosbie told conference delegates that, while there are billions of internet users - and advertisers keen to reach them - online publishers are failing to confront fundamental economic realities.
Advertising revenue is failing to support the investment committed to online ventures and readers are failing to find the internet a convenient way to source news, he said.
Recent figures show that New York Times Digital lost $37 million on revenues of just $42 million while Tribune Interactive lost $42 million on revenues of just $24 million.
"Web publishing is not going to bring the revenues that a lot of publishers originally thought they would get and I do not believe this will change. They do not understand the differences between traditional print media and the new media," Mr Crosbie said.
Internet users rarely turn to their favourite online news sites, he said. The average user of the New York Times online version visits the site just three times per month. For the 20 most popular news sites in the US the average is just 2.75.
Mr Crosbie - who now heads the new media consultancy DigitalDeliverance - blames this on the technology. "A web site doesn't actually deliver anything," he said. "It is a retrieval mechanism. If your content changes daily online but your average user only comes in once every five days then you've got a problem."
He argues that online consumers behave as they do offline in the US where only 16 per cent of newspapers are sold to non-subscribers via news vending machines.
He was scathing about publishers that have tried to solve their revenue problems by charging for content. "What makes you think consumers are going to pay for something they don't even use regularly when it's free?".
Perhaps the most important reason why consumers are failing to use online news sites is the fact that the internet is an inconvenient format, he said. HTML was never designed for graphics, people roam but PCs don't, and PC resolution is not comfortable for on-screen reading he argued. The size of the screen also limits the user experience. WAP, he said, has an even smaller screen and worse resolution.
New technology, said Mr Crosbie, will provide solutions to many of these problems. Truly portable and wireless devices capable of internet connection with lap-top capability are being developed. The best offer improved resolution for improved graphics.
"These devices are designed for content publishing," Mr Crosbie said. Many people carry a mobile phone, a laptop and a Palm handheld device. "Why are you carrying three devices around? Why not just have one device you could fit into a pocket?".
Such devices will give publishers the opportunity to sell online subscriptions where new editions are downloaded automatically.
In the meantime, there are stop-gap solutions for internet publishers. The UK's Financial Times, he said, has 800,000 daily e-mail newsletter subscribers and the New York Times has more than a million. Click-throughs by these subscribers generate an estimated 40 per cent of the total traffic to their sites.
Other sites offer users the ability to sign up to specific pages. These are then e-mailed as HTML messages with every new edition. Some sites even charge for these services.
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