It has been almost two years since Intel chairman Andrew Grove told a group of US newspaper editors to either move onto the internet or face a certain, sudden death. "Nothing sharpens the awareness of the situation like the sight of the gallows," Mr Grove told them.

It was a classic Grove moment, one that allowed him to flash his signature trait: paranoia. His comments probably only amplified existing jitters in the room, coming at a time when traditional businesses everywhere were worried about being overthrown by dotcom upstarts.

Many newspapers and broadcast media groups took Mr Grove's sentiment to heart, prompting them to pump money into their internet newsgathering operations. They set up separate dotcom divisions, sometimes with a stated intent to spin them out into tracking stocks.

No major media company was able to translate its dotcom investment into an internet stock windfall, however. A model for making money from online content was not quick to emerge, and the losses mounted. The result has been a spate of lay-offs, corporate realignments and a re-examination of when the promise of new media will pay off.

At CNN, the cable news network arm of AOL Time Warner, the new media are being tied more closely with the traditional newsgathering operation. Most of CNN's freestanding internet divisions are being integrated with its television counterparts. That move, which came days after the AOL Time Warner deal was approved in January, resulted in 400 job cuts at CNN.

Rupert Murdoch's Fox News made a similar move only weeks earlier at a cost of 200 jobs. Other media companies, such as The New York Times Digital and NBC, have also trimmed back jobs at their online operations.

The situation has been grim at pure play internet news organisations, too. TheStreet.com, the financial news site, halted its UK operation and has cut back on initiatives in the US. Lay-offs have also hit CNBC.com, Business.com, CNET, Salon.com and The Industry Standard.

What is remarkable is that these lay-offs have come from all types of media companies: global conglomerates, newspapers and pure play internet content companies.

"No one is less interested in what they can do digitally, because they know that is where the growth is," says John Pavlik, a professor of journalism and executive director of the Center for New Media at Columbia University in New York. "The really serious operations realise how important this is, but they have to slow the pace of things."

Mr Grove's prediction may well turn out to be true. Yet news organisations no longer fear an imminent upheaval. Instead, there is a recognition that developing an online news business is likely to take many years.

"I don't think you can treat this as a fashion or a fad," says Martin Nisenholtz, chief executive of New York Times Digital. "This is a 40-to 50-year transformation, not a five-year one. If you run your strategy by short term fads, you'll be dead."

Mr Nisenholtz still seems amazed by the change in the climate in just a little over a year. The New York Times was applauded for being the most aggressive newspaper in pushing onto the web. It filed to issue a tracking stock for its digital unit, but the appetite for internet-related initial public offerings soured. By late 2000, it shelved the plan. And by early 2001, the digital group was forced to lay off almost 70 staff.

The job cuts, he says, were "a short-term tactical adjustment to the market bubble". He adds that any new media company not re-assessing its business right now is likely making a mistake.

"What we've had to do is adjust to a marketplace that moves very fast," he says. Although he knew the bubble would not last, he had thought a less-crowded market for the main players would have developed more quickly.

What gives Mr Nisenholtz and others in the new media business reason for optimism is the promise of a richer internet experience that will begin to take form in the next few years. Already, advertising groups are beginning to experiment with bigger, more compelling types of advertising to replace the ineffective banner ad. The hope is these new ads will entice traditional advertisers to devote a larger portion of their marketing budgets to the internet.

"With richer media coming into the loop, I think this will be a successful advertising medium," Mr Nisenholtz says.

Most news organisations have begun experimenting with wireless connectivity, which could be another growth driver. And as broadband internet connections become more common in US homes, there will be opportunities to make news on the internet more compelling through the use of video. Several news sites already incorporate multimedia content along with text versions of their stories.

"I think a lot more news will be delivered to mobile devices, through both text or voice," Mr Pavlik says. "How you present the news in a digital space is very different than in the traditional media space. I think we're still seeing news organisations that are developing [strategies for] digital story telling."

What seems clear, though, is that new media groups will have to develop these new technologies with far fewer resources than they had before - at least in the near term. Most US media groups are contending with an advertising slowdown, making a quick rebound in spending on new technology unlikely. Indeed, some newspaper analysts suggest that today's advertising climate is the worst slowdown they have seen in a decade.

Against this backdrop, media groups face a delicate balancing act of developing their digital businesses while weathering a slowdown. Otherwise, they could discover that they have regained sight of the gallows.