Online Advertising To Grow To $18.8B By 2005.

By 2005, online advertising will be an $18.8 billion market in the United States, up from $7.9 billion in 2001, according to GartnerG2.

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 percent 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.

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

“Due to decreased growth and market domination by the top players, online media firms must diversify their products and services to supplement the income they expected to receive from online advertising,” said Denise Garcia, research director for GartnerG2. “Diversification is the future for this industry, so those who do not branch out will see their online advertising revenues decrease and their user bases deteriorate.”

According to GartnerG2, there are five additional revenue streams that online media can implement to make up for the lack of advertising revenue. 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.

Those revenue streams are business services, subscriptions, licensing, e-commerce and international expansion. Business services is predicted to be the largest area for revenue growth, followed by subscriptions.

Business services are defined as customized enterprise software services, audio/video streaming, store hosting, and management and Web-site tools and services.

“One benefit of expanding into business services is that media companies can dramatically expand their user bases to include business users by adding features and services such as audio/video streaming and corporate portals,” said Garcia. “They can then use that new user base for advertising by selling ads targeted to business audience at rates significantly higher than those for ads to their consumer audiences.”

The challenges will be growing the user base, marketing that base to advertisers and expanding into other forms of advertising. GartnerG2 research reveals as many as 80 percent of agency requests for proposal include requests for integrated marketing proposals.

“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,” Garcia said. “Expanding distribution channels for advertisers not only provides opportunities for increased advertising revenue, but creates additional revenue opportunities overall.”

For more information at http://www.gartner.com.