Two years ago, Steve Martz could barely get the words out to explain that he was selling advertising for The Blade, Washington's gay community newspaper, when the receptionist at a Dupont Circle travel agency promptly threw him out.

"She just freaked out and said, 'We don't want to have anything to do with that kind of newspaper,'" recalled Martz, associate editor of the paper.

Nowadays, more merchants around Dupont Circle, Capitol Hill and other areas of the city listen to Martz than toss him out. And some agents from out-of-town firms like Richard Ray, a fleet manager for National Car Rental, which regularly runs a quarter-page advertisement in The Blade, are also testing the buying power of the more than 70,000 homosexuals in the Washington area by advertising in The Blade.

"It's a market that cannot be ignored.A bunch of 'em got money. It's pretty stupid not to advertise to them," Ray said. Representatives of the Miller Brewing Co. of Milwaukee and Finlandia Vodka of New York are also pitching their wares in The Blade.

Eleven years ago, it was only a mimeographed sheet, not well known and not even as effective as the ever-productive grapevine that wound through the very much closeted homosexual community.

Now, The Blade -- a free, 32-page biweekly billboard of gay-oriented information, from politics, religion and movies to bars, bath houses and roommates -- has become one of the city's largest community newspapers, with a circulation of about 20,000.

Its operating budget has quadrupled in three years. And the paper has established a solid advertising-base -- even though its rates are higher than those of other community papers like the Uptown Citizen, The Washington Informer and The Washington Afro-American.

The success of the Blade is an indication that Washington's homosexual community, already respected for its fervent political potence, is gaining economic recognition as well, and beginning to build its own institutions beyond ceremonial observance, such as Gay Pride Day, which is being marked today in the P Street Beach area at 23rd Street NW.

Gays view the newspaper as their community trading post of information. One lawyer who works for a law firm just off Connecticut Avenue, for example, said he usually picks up his free copy of the newspaper from atop vending machines in local gay bars that he frequents.

"I can read The Blade regularly for information on gay news or plays and performances that would be of particular interest to gays, but would not be included in The Post or The Star," he said.

And advertisers are looking to the newspaper as a way to reach many of the young, upwardly mobile professionals who have fueled the city's urban pioneer movement, a market that is presumed to be lucrative.

"Almost all of them are adults, they buy clothes, go to restaurants and movies and will spend money as fluently, if not more so, than their straight counterparts," said David Abramson of Abramson -- Himmelfarb, one of the area's largest advertising agencies.

"I know that they are a very loyal audience and they support merchants who support them," said Ron Sachs, an owner of Congressional Photo on Capitol hill. "They are people with a cause, just like any other group. In hard economic times, the more markets you tap, the better off you are."

In the late '60s, The Blade, then called The Gay Blade, was a mimeographed broadsheet written and edited by volunteers in the basements and living rooms of a few gay activists.

During the middle '70s, the paper dropped "Gay" from its nameplate, a reflection of its then conservative board of directors, and the paper struggled along.

It grew on the heels of the success of local gay activists who won passage of a tough antidiscrimination law in Washington, and then began to emerge as a more professional-looking publication that attacked discrimination against women and blacks in white-oriented gay bars. It's readership and reputation grew.

No longer relegated to secretive publication, The Blade staff now enjoys the comfort of modest offices at 930 F St. NW in the gothic looking Atlantic Building in downtown Washington's old shopping district.

Staff members work amid posters of Nijinsky, color snapshots of handsome men on a bare brick wall, and classical music playing softly in the background. They use modern computerized typesetting equipment, do paste up and just about everything needed to publish the paper except the actual printing, which is done at a Northern Virginia printing shop.

Despite the changes and modern conveniences, however, The Blade retains its old grapevine rold of providing information not only in the stories its writes but in advertisements as well. More and more, gay professionals or "straight" professionals sympathetic to gays have begun to reach out to the homosexual community.

"People see the advertising in The Blade. If they want to buy eyeglasses, go to a dentist or get legal services, they want to go someplace where they will feel comfortable -- comfortable enough to make out a will to leave their belongings to a lover, for instance," said Blade Editor Don Michaels.

Michaels said the number of professional ads, including stenotype services, legal, medical and real estate, have increased dramatically in the past year.

Steve Endean, executive director of the Gay Rights National Lobby, a group that lobbies Congress in support of pro-gay legislation, said that homosexual community is getting the word to "buy Gay, or at least support those (nongay businesses) who support gays."

A GS 13 Agriculture Department employe, who asked not to be identified, said he recently bought his renovated inner city from a gay contractor through a gay real estate agent. He bought his homeowners' insurance from a gay insurance saleman who works for a "straight" Washington insurance company. In addition, he plans to use a gay interior designer to help him furnish his new home. And, when he needs a haircut, he goes to a gay barber.

The "buy gay" or support gay organizations movement has helped to mobilize and strengthen the homosexual community. Yet, just as the gay community is not monolithic, neither is its support uniform for The Blade.

Ellen Levi, a Blade board member and reporter since 1975, said that while The Blade was created to satisfy the need for a news medium by gay people, for gay people, the paper immediately found itself confronted by criticism from a multifaceted gay cummunity.

"We began having problems with the male gay community, the female gay community, the black gay community, closeted professional gays who wanted a more conservative approach, gay activists and lesbians separatists.

"All these people were gay, but they came from differing political, social, religious and economic perspectives," said Levi, one of the few staff members who still uses a pen name. "The Blade now has to speak to all those communities."

The latest issue of The Blade, for example, includes stories on the arrest of two Marines charged with the beating of a homosexual near the Iwo Jima Memorial in Arlington, and the announcement that a Republican candidate, also a gay activist, will challenge Del. Walter Fauntroy (D-D. C.) in his race for reelection. Neither story appeared in the daily media.

Few stories are examples of hardhitting investigative journalism: The Blade relies on part-time, free-lance journalists with little or no news training. Yet, many stories are informative and written interestingly.

Inside the paper, stories run the gamut from compendiums of national and local gay-issue-oriented news to a community calendar of events and classifieds, including personal ads: "GWM (Gay White Male) 25, attractive, conservation prof. seeks good looking rich man to be the envy of all my friends. Ultimate goal is long term relationship, reply, P.O. Box . . ."

One recent issue reviewed Broadway and Off-Broadway plays and musicals with gay themes or overtones and local nightclub acts and movies. The front page carried a photo of playwright Tennessee Williams, "one of America's leading gay citizens," receiving the coveted Medal of Freedom award from President Carter.

The Blade has grown to become one of the city's largest community newspapers even though it charges more per agate line and column inch for advertising than the Uptown Citizen, the Washington Informer or the Washington Afro-American, three other community newspapers.

A one-column-inch ad of roughly the same size for example, cost $9 in The Blade, $7 in the Uptown Citizen and $6.44 in the Afro-American. In each issue of The Blade, from 48 to 55 percent of available space is filled with advertisements.

While no research has been done locally to validate common perceptions of the homosexual community, gays and advertising media specialists say a favorable comparison can be drawn between the results of a readership survey of a national gay news magazine called The Advocate and Washington's own Blade newspaper.

A three-year-old readership survey by the Advocate, based in Los Angeles, revealed that the average income of its readers was $23,600, more than 50 percent above the national average three years ago.

The survey, conducted and audited by the "straight" Los Angeles firm of Walker and Struman Researchers Inc., said 70 percent of The Advocate's readers use airlines four times a year, 80 percent owned at least one car, 80 percent drank by brand names, 70 percent were college graduates, 97 percent were employed and 84 percent were regular voters.

The Advocate, which looks more like a gay version of The Rolling Stone magazine than a newspaper, enjoys a largely white male readership while The Blade's editors say its paper has a broader readership attracting women and minorities.

Kris Kohlman, media director for Goldberg & Marchesano, another large Washington ad agency, said she was surprised to learn that recently gay publications have their own listing in Standard Rate and Data of Consumer Publications, a book that ad agencies look to when planning their media budgets.

"The inclusion in Standard Rate and Date makes the gay media a more viable media now," Kohlman said. These kinds of developments make Blade editors optimistic.

"As the press gets financially stronger, we are going to be more than just promoters of events," Blade editor Michaels said. "We are getting better reporters and I look forward to the day for a fulltime reporting staff. bNowadays, the gay media isn't falling hook, line, and sinker for 'gay is good,' without asking questions.

"We've got to ask more questions about who is behind the events, and where the money is coming from," he said. "It's going to take the gay community and gay activists a little getting used to the fact that the gay press is growing up."