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The Internet Economy

Computer Science 01iIntroduction to the Internet

Neal Sample6 March 2001

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Today we will cover...

• A short case study:the British online shopper

• Making Money on the ‘Net• The new and perhaps improved,

“Last Project”

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Case Study: The British!

• Survey comes from CommerceNet.com• Data was taken in September, 1999• Data is available at:

http://www.commerce.net/• Definition:

Online shopping is defined as gathering information about products or services; it does not necessarily indicate online product purchases.

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Gender Split

• Male to female users not too different from the US

• Still no equity (3:2)

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Users, Shoppers and Buyers

• 12.1 million “users”

• 6.1 million “shoppers”

• 3.4 million “purchasers”

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Differences from the US?

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Male and Female Shoppers

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Purchases

Top Items Purchase by Males

Books: 953,000CD/Videos: 729,000Computers: 541,000Software: 464,000Travel: 356,000

Electronics:204,000Clothing: 138,000

Top Items Purchased by Females

Books: 429,000

CD/Videos: 249,000Travel: 226,000

Software: 91,000Computers: 57,000Electronics: 51,000Clothing: 45,000

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Who buys the books?

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Again, who buys the books?

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Making Money on the ‘Net

(Enough about the British, already)

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Future of the Economy

• Internet Purchasing We know about 80% of Americans have

purchased online But what do they buy? Literally

everything.

• Are there some markets the Internet will not be able to touch?

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Why Buy and Shop Online?

• convenience• saves time• privacy• rich in information for researching• easy to compare prices and features• no time pressure on decision making

…Will these factors change?

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Presto!

And now, a couple of last year’s slides…

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Extrapolating the Trends

• Within 2 years, many current markets will be saturated Remember the sales of Internet toys

from the first day of class? We only sell so many products, so the

competition moves to “who do I buy from”

• With saturated product markets, what comes next?

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Services: the next Internet Economy?

• Product usage must be fixed at some level. (How many Ferraris can I drive at once?)

• But services enabled by the net are a new frontier… some old, some new Bill paying (www.statusfactory.com) Hiring services (www.monster.com) Even bookmark storage!

(www.mybookmarks.com)

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How will Internet companies make money?

• By giving it away? (LA Times, 7 February 2000)

• However, the business model of giving away products is proving unsustainable in some instances, and some online firms have now been losing money for four or five years. While online companies try to compete by offering freebies and discounts, most giveaways are not successful and simply encourage consumers to seek bigger bargains.

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At some point, the bubble will burst

• Companies that don’t sell anything will fail eventually selling products selling services advertising (selling eyeballs) transaction fees from direct sales (ebay) transaction fees from sales advertisers make

as a result of the site

• There has to be SOME revenue stream

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When it does, what’s left?

• Probably a few megaportals Yahoo Neoplanet AOL

• Well established bricks and mortar businesses

• Those who have the largest number of eyes on their sites

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Is there room for the small fish with big ideas?

• Maybe - let’s look at online auctions Why is www.ebay.com more successful

than www.ZebsHillbillyAuctions.com?

• Who else does auctions? • Is there any protection for the idea of

a service?• What does this mean?

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With no service protection, who wins?

• Probably consumers• As service monopolies form and

prices rise, the cost of starting Internet competition is less of a barrier...

• Is there such a thing as brand loyalty for a service?

• Is there such a thing as brand loyalty to an Internet agent?

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Back to the new stuff…

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Building though

• According to a Meyers Group study, the top five factors considered in deciding whether to use online advertising are: 81% Targeting 77% Brand Building 74% Click Rates to Corporate

Sites 60% ECommerce 56% Audience Reach

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Expected Advertising

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What we know so far

• Money through selling products www.buy.com

• Money through selling services www.statusfactory.com

• Money through selling advertising www.doubleclick.com

• Transaction fees www.ebay.com

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What else is there?

• Subscriptions fees www.espn.com

• Donations http://www.penny-arcade.com/

• Micropayments? Reasons for? Against?

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Last Project!

• Make a prediction about the Internet!• Take out your crystal ball and guess

what the will change in a year (or two, or ten)! Technology? Economy? Demographics? Something else?

• Next year, we’ll see how you all did!