BOSTON--(BUSINESS WIRE)--May 1, 2001--The online photo service market zoomed into existence in late 1998, offering users a great value proposition: free online photo sharing. In 1999, a flood of new players entered the space, all seeking a slice of the pie to be funded by advertising and e-commerce.

Now two years later, this market is facing much-needed consolidation. Users have indeed flocked to post photos online, but as with other sectors of the dot com industry, advertising revenue failed to materialize, and e-commerce is growing much more slowly than early indicators predicted.

A new forecast report from InfoTrends Research Group drastically cuts back projections for online photofinishing revenue, based on collecting a year's worth of actual data from vendors and surveying users on their awareness of online sites and their actual usage habits. As a result, the report gives new insight into the state of the market and the expected rate of growth. The report shows that, although over 8 million people posted photos to photo service Web sites and 28 million people viewed online albums in 2000, per-user revenue was disappointingly low.

"With the advertising market softening, and subscription memberships still in their early stages of development, e-commerce will continue to be a key revenue source for photo service Web sites," said Lia Schubert, research analyst at InfoTrends Research Group. "Online photofinishing revenue is forecast to grow at an average annual rate of 57% through 2006, but in the short term, it is not enough to support so many players dependent on self-funded growth."

The consolidation has some healthy side effects. Dot com spending served to educate the market and fund critical technical development, but it artificially lowered prices, and threw at users a dizzying array of new products and services. Now that the free-for-all is coming to an end, users will learn to pay for services, and players with weaker revenue sources will get absorbed or exit the market. Those who remain will benefit from economies of scale, more user mind-share, and the credibility that comes with longevity.

The new report, 'Online Photo Services Forecast - Playing by New Rules,' available immediately, contains five-year projections for photo site members, visitors, number of prints ordered, total online photofinishing revenue, analysis of key issues, and many other metrics. The report also profiles 29 key players, including AOL, Fuji, Kodak, Ofoto, PhotoAccess, PhotoPoint, PhotoWorks, Shutterfly, Snapfish, Sony, and Zing. InfoTrends' forecasting process was supported by the findings two other recent studies, 'Online Photo Services End User Survey,' and 'Retail Digital Photofinishing Market Outlook,' available separately.

About InfoTrends Research Group
InfoTrends Research Group, Inc. (www.infotrends-rgi.com) is the leading market research and consulting firm for digital imaging technologies and markets. With the largest number of analysts dedicated solely to digital imaging, InfoTrends offers the most focused coverage of this rapidly evolving market. InfoTrends helps its worldwide clientele improve the effectiveness of their strategic planning by providing valuable tools for intelligent decision-making, including forecasts, end user research, product analysis, and market trend tracking. Research is available through standalone reports, custom consulting and through the following subscription advisory services: Image Scanning Trends(TM), Digital Photography Trends(TM) and Internet Imaging Trends(TM), available in hard copy and online format. InfoTrends is committed to promoting market growth and development through ImageScape(TM), the foremost press and media event series for the digital imaging industry, and through its industry conferences.