According to the Jupiter Research report, "Content Revenue Streams: Market Opportunity and Revenue Diversification," paid content will continue to grow at an annual rate of over 20% until 2007, when it will reach $5.4 billion. Syndication revenues for consumer content will grow from a very small base in 2003 to $1.4 billion in 2007, but that revenue stream will not reach its full potential without industry consolidation.
At the same time, Jupiter says, online advertising spending will reach nearly $14.0 billion in 2007, up from $6.2 billion in 2003.
"Consumers are slowly opening their pocketbooks for paid content," said Jupiter Research VP and Research Director David Card. "However, for at least the next 18 to 24 months, most online media companies should generate 60% to 70% of their revenues from advertising."
The $2.0 billion forecasted for paid content spending is fragmented across over a dozen categories ranging from news to sports to health to adult content, making it difficult for any one company to collect a significant share of that spending. Leaders are only beginning to emerge, and consumers, already reluctant to spend for online content, face dealing with multiple billers.
"Third-party syndication is immature, there are too many companies launching their own paid services and ISPs have only just begun to bundle content with access," Card said. "Those factors conspire to inhibit paid content and syndication revenues, forcing most online media businesses to concentrate on advertising. There's a wildcard that could boost online media revenues -- digital direct marketing. But most media companies haven't figured out how to tap those dollars. E-mail marketing alone is a $2.1 billion business in 2003."