The gap between what's paid for on online content and what advertisers are willing to spend on the Web is widening, with more being spent on advertising online than is being collected from subscriptions for paid content.
According to reports released this week, the ratio of online ad dollars spent vs. content paid for will end the year at roughly 10 to 1.5, "a significant leap from several years back", writes CBS MarketWatch.
The gap has widened. "Three years ago online advertising was about three to four times the amount spent on paid content," said Michael Zimbalist, president of the Online Publishing Association (OPA).
The OPA reported that Web surfers spent $853 million in the first half of this year on paid content. The Internet Advertising Bureau said that online advertising dollars shot up 35 per cent in the third quarter to $2.43 billion.
The bureau said: "2004 is shaping up to be a record year, possibly exceeding by a large margin the previous revenue record." [$8 billion set in 2000]. Some predictions suggest that online advertising could reach $10 billion this year.
At the same time there has been some increase in the amount spent on paid content, but this 14 per cent increase from the same period last year is "due in large part to a surge in music downloads, such as people buying songs from Apple's iTunes", says OPA.
The company indicates that subscription fees for business investment content fell 6 per cent in the same period.
The article concludes that the online advertising model for news is better than a subscription-based model.
Even if paid content continues at the same growth rate it will reach $1.7 billion in 2004 – a growth rate that's less than half of online advertising, notes MarketWatch.