Internet: Between Ecstasy and Oblivion
The Net- economy may be fickle, but it is predictable, say ActivMedia Research
8 August 2001, 3 pm GMT
The Internet in 2001 is notoriously fickle - some sites continue to build market
share and grow while many others fade into oblivion, say analysts at ActivMedia Reaserch.
The difference between the two is actually
fairly simple to understand, according to recent research.
Technologies that contribute to increased productivity of trading partners - consumers and retail stores, importers and exporters or business buyers and the vendors that supply them, and all merchants in general - continue to become
widely adopted by online merchants.
Shopping carts, for example, and online display conveniences are widely adopted because they simplify and speed up transaction processes (e-commerce support services in use at 72% of consumer-oriented companies will rise to 81% in the coming year).
Multi-party import/export systems carry
the load of paperwork and processing, automating and simplifying complex procedures and allowing more companies to participate in global business (rising from 8% of company business prior to adopting online practices to 21% today).
Database-driven online catalogs that allow
easy access to information in a variety of formats are currently in use at nearly a third of websites (30%), and will grow by a third to 40% in the coming year.
Online subscriptions for online companies that have parallel offline magazines are expanding dramatically, accounting for 40% of subscriptions in 2000, rising to 50% in 2001 and 61% in 2002. Immediacy and instant gratification that the transaction is finished add up to impressive gains.
At the same time, marginal technologies
that only serve market slivers or that poorly match inherent capabilities to genuine consumer needs, while growing,
have limited upside prospects for success in the near future.
Browsing over 2" cell phone screens may be sufficient to set a golf Tee- time or get a few words of email from an automated stock-watching system, but are inadequate to convey sufficient information to stimulate most product sales. As a result, m-commerce over wireless
phones and PDA-based wireless commerce acceptance is relatively low, although growing, and c an never reach widespread levels of acceptance of some other enabling technologies. (m-commerce is currently in use at 3% of online vendors, and will jump to 14% in the coming year. PDA commerce is in use at 4% of online vendors, mostly B-to-B, and will rise to 12% next year)
Reliance on online auctions treats all products as
if they were totally substitutable commodities where only price counts, ignoring the large picture of factors that surround most purchases - assurance of quality and delivery, ease of problem resolution, personal
relationships between buyer and seller, company traditions,
appreciation for the background and knowledge residing in the trading partners' common history.
As a result, most major players avoid online auction services, but implement internal or consortium-controlled bidding systems that respect key selling needs for their own markets. Third-party market makers are most successful in smaller markets where many smaller buyers and sellers need a centralized trading system to come together.
As a result of Internet innovation, half of today's profit-seeking online vendors are profitable (52%),consistent
with findings in past waves of the ActivMedia research, and four in five of today's vendors expect to be profitable by spring 2002 (79%).
Not bad for an industry in distress.
www.ActivMediaResearch.com
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