• by Masha Geller , December 19, 2001

For those of us lacking optimism in the face of 2002, GartnerG2 today released some figures sure to inspire good cheer.

Whether you believe in their crystal ball or not, GartnerG2 predicts that by 2005, online advertising will be an $18.8 billion market in the U.S., up from $7.9 billion in 2001.

While advertising growth remains flat or receding in TV, radio and print, online advertising revenue is set to grow considerably, but it is only 3% of the total advertising market. Therefore, GartnerG2 advises online media firms to diversify their revenue streams in order to stay viable and capture revenue growth.

Researchers estimate that out of the 2,800 sites selling advertising in the United States, the top 20 sites receive 80% of the revenue. GartnerG2 also forecasts that year-over-year growth in online advertising will be just 15% by 2005, compared with 100% in 1998.

According to GartnerG2, there are five additional revenue streams that online media can implement to make up for the lack of advertising revenue - business services, subscriptions, licensing, e-commerce and international expansion. All five revenue areas would help online media businesses solve advertising growth challenges by expanding user bases, obtaining better demographic and targeting information from user registrations, and ultimately supporting sales to advertisers.

The challenges will be growing the user base, marketing that base to advertisers and expanding into other forms of advertising.

"Advertisers are increasingly demanding unique, creative, integrated advertising programs that require online media properties to expand into other forms of interactive media such as interactive TV, wireless and kiosks," said Denise Garcia, research director for GartnerG2. "Expanding distribution channels for advertisers not only provides opportunities for increased advertising revenue, but creates additional revenue opportunities overall."