Paid Content Spending Rises 155 Percent in Q1; Money Spent On Content Totals $675 Million in 2001 Thursday, August 01, 2002, 1:41 PM ET

by Rafat Ali

The learning curve for online user’s willingness to pay for content is on the rise, though there is still a long ride uphill, as evidenced from the latest study released by the Online Publishers Association.

The study, conducted by online research firm comScore Networks, found that U.S. consumers spent $675 million for online content last year, a 92 percent increase over 2000 spending levels. Of course, that total spend is only 9.37 percent of the total online ad spend last year, estimated to be about $7.2 billion by the Interactive Advertising Bureau. Compare this to the newspaper ad versus circulation revenues ratio, typically 3:1, and the picture for online content becomes clear: it is still in the early stages of acceptance.

However, the industry growth seems to be accelerating, as consumer spent rose 155 percent for the first quarter this year to $300 million, compared to the year-ago quarter. Also, as a percent of the total Internet population, consumers of paid content increased from 5.3 percent (5.3 million people) in the first quarter of 2001 to 9.2 percent (12.4 million people) in the first quarter of 2002.

Among the sector wise spend, the business-related content is the top-spending category ($214.3 million), followed by entertainment content ($112 million) and online personals ($72 million). All three account for about 59 percent of total content spending online. General news is the fifth biggest category with about $51.8 million in online consumer spend. The online greeting cards category had a strong $6.8 million consumer spend in 2001, buoyed by the fact that and introduced a subscription model fourth quarter last year.

Online Content Spending By Category (in $ millions)

Business Content $214.3

Entertainment/Lifestyles $112.0

Personals/Dating $72.0

Research $57.9

General News $51.8

Games $46.5

Community Directories $46.1

Credit Help $32.4

Personal Growth $24.7

Sports $10.0

Greeting Cards $6.8

Monthly or annual subscriptions are the dominant pricing model for online content sites, accounting for 85 percent of sales last year. Single purchases accounted for only 15 percent of sales, less that 2 percent (less than $2 million) of which was made up of micropayments of under $5 value. Out of those annual subscribers, the renewal rate among them averaged at 72 percent. Meanwhile, the conversion rate for online content sites–moving the users from free trails to paid subscriptions–averaged at 17.4 percent, a figure which shows a lot of room for improvement.

The total amount being spent per consumer is also on the rise: The average spending per consumer increased 46 percent (to $24.13) in the first quarter of this year, compared to the year-ago quarter. The average price for annual subscriptions was $49.69 last year, while the monthly subscriptions average price was $8.46. The average price for single content items purchased online was $17.89 last year.

All pricing models experienced rapid growth in the five measured quarters, suggesting that there is still room for publishers to experiment with pricing models, according to the study.

Of course, mirroring the trend in online advertising industry, the biggest sites garner the largest share of consumer content spend online. About 85 percent of the money spent for online content goes to about 50 sites. Among the top paid content revenues garners for 2001 were, with its RealOne SuperPass multi-media subscription service;; online dating site; portal giant; and consumer goods research site Among the other sites in the top ten include genealogy site, and personal research site

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