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Paid content slowly winning converts

Consumers are warming to the notion of paying for online content, but that isn't soon likely to translate to a windfall for Internet companies, according to a new study.

Consumers are warming to the notion of paying for online content, but that isn't likely to translate to a significant source of revenue for Internet companies anytime soon, according to a new study.

In a report released Monday, Jupiter Research predicted that consumers will pay $2 billion for online content in 2003, a 30 percent jump from the $1.6 billion they spent last year. The company also predicted that paid content will then grow at a 20 percent rate through 2007 to reach $5.4 billion.

"Consumers are slowly opening their pocketbooks for paid content," Jupiter Research Director David Card said in a statement. "However, for at least the next 18 to 24 months, most online media companies should generate 60 percent to 70 percent of their revenues from advertising."

Online advertising revenue is expected to dwarf paid content revenue, reaching $14 billion by 2007, up from $6.2 billion in 2003.

Internet companies will have trouble becoming leaders in the area of paid content because the money will be split across a dozen categories, ranging from health to news to adult content, according to the study.

Other sources of revenue, such as syndication, are too immature to be significant at this point, the study said. But researchers did say that digital direct marketing, such as e-mail marketing, could boost revenue, if only companies could figure out how to harness it.

The report comes as consumers are giving paid content mixed reviews. According to a study released earlier this month by the Online Publishers Association and ComScore Networks, paid content revenue nearly doubled last year, but spending on paid content during the holiday period of 2002 actually declined when compared with the same period in 2001.

That study also said that online dating was the clear leader in the paid content market, but that consumers were also willing to pay for financial services and entertainment/lifestyle content. The top five paid destinations in that study were Yahoo, Match.com, RealNetworks' Real.com, Classmates.com and Dow Jones' WSJ.com.