According to a new McKinsey & Co. report, the power of television advertising is in decline, and by 2010, traditional TV advertising will be one-third as effective as it was in 1990.

McKinsey assumes a 15% decrease in buying power driving by cost-per-thousand rate increases; a 23% decline in ads viewed due to switching off; a 9% loss of attention to ads due to increased multitasking and a 37% decrease in message impact due to saturation.

“You’ve also got pronounced changes in consumer behavior while they’re consuming media,” said Tom French, director at McKinsey. “And ad spending is decreasingly reflecting consumer behavior.”

Real ad spending on prime-time broadcast TV has increased over last decade by about 40% even as viewers have dropped almost 50%. In other words, advertisers are paying more and getting less, which will make them turn to alternatives, such as Internet video.

Teens are watching less traditional television, as they spend more time with cable, PC computers, cellphones, CD players, VCRs, game consoles and the Internet. In fact, teens spend less than half as much time watching TV as typical adults do. According to the report, though, teens spend 600% more time online, surfing the web.

Advertising dollars will flow where people’s attention is, and McKinsey’s report indicates that attention is increasingly moving online.

According to Advertising Age, a limited online-ad supply and the web’s generally fragmented nature will keep TV in booming business for the next several years. It will take several years for supply and demand to balance out.

“Should everybody shift 30% of their dollars to the web?” asked Amy Guggenheim Shenkan, senior practice knowledge specialist in McKinsey’s San Francisco office. “No. There wouldn’t be room today if everybody wanted to shift online. Last year [online media] was $12.5 billion, by end of 2007 digital advertising will be $18 to $25 billion. … So we’re seeing a lot of growth, but if you want to match up share of attention and share of dollars it couldn’t happen for that reason.” The TV ad industry is a $68 billion one.