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Internet economy going from strength to strength

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Internet economy going from strength to strength second time round

Solid new business models, backed by spectacular growth in online advertising, are quickly laying the foundations of the new internet economy, a new study has found.

Coined Web 2.0, reflecting the expanded capabilities of the internet, the new digital technologies are altering and enhancing the online experience – allowing people across the globe to interact and collaborate as if they were next door.

Independent researcher BuddeComm has released a two-volume study, 2007 Global Internet. The first volume, Web 2.0 Revives Internet Economy, analyses the trends and developments taking place as the world adjusts to the brave new economy of the net. Volume 2 – Online Content and Services – takes a closer look at the emerging business models and the new advertising medium.

“Business is booming on the web,” says BuddeComm Managing Director Paul Budde. “There’s been an explosion of online content and services, largely driven by the internet media giants like Google, News Corp and Yahoo, and they’re making good money from them, too – which is paving the way for our digital future.”

According to 2007 Global Internet, more than $2 billion is estimated will be spent on social network advertising in the US by 2010. Social networking and user-generated content will feature prominently among a range of new killer applications in the Web 2.0 world. But also flourishing are travel-related services, gambling, adult content, music and health services.

In particular, e-health – the delivery of health services via broadband – is seen as a means of providing crucial care efficiently and cost-effectively as people live longer and place greater emphasis on keeping fit. According to Budde, “This, alone, could fund free broadband access to most households in the developed world.”

Web 2.0 has also led to a host of new developments: Instant Messaging; Peer-to-Peer services; Wikis (user-sourced content); Really Simple Syndication (RSS feeds) for news and information; blogs and other forms of social networking; and alternative revenue streams, such as pay-per-click advertising.

“It is the burgeoning number of households and businesses with broadband connections, which has been the main driver behind the current boom” Budde says. In several European countries, 75 percent, or higher, of households have the internet, which gives e-commerce a strong platform from which to do business.

According to Kylie Wansink, BuddeComm’s Senior Analyst Global Markets: “The Googles and Yahoos of the online world have quickly taken advantage of the extra speed and capacity of broadband infrastructure with video applications taking centre stage on the web. But the media companies – and this has contributed to the web’s revival – aren’t burdened by crippling production costs, with half of the video content generated by the ordinary online community.”

This year internet advertising expenditure is forecast to top $31 billion worldwide, up from $24.4 billion last year. But of interest, the $31 billion is 7 percent of overall ad spending across all media, up from 5.8 percent of the total in 2006. In 2008, internet ad spending will account for nearly 8 percent of all spending and more than 8.5 percent, or $43 billion out of a total of $495 billion, in 2009.

Some of the basic and more popular online advertising models include pay per click (a company pays every time its ad is clicked), pay per visitor (to a website) and pay per action. But many other forms are emerging, such as permission-based and interactive advertising, which take a more targeted approach to consumers, and thus are likely to become widespread.

But online payment gateways, such as PayPal, have also made a vital contribution to the growth of e-commerce, creating quick and simple ways for consumers to pay for goods and services online.

Even so, Wansink says, “there are early indications, despite the spectacular success of Web 2.0 that online spending growth may slow quicker than first thought – to about 10 percent rather than 20 percent by the end of the decade. But that may also be a sign that e-commerce is maturing.”

Cost of each report is US$595 (excl GST) for a PDF with a single user licence. Prices available on request for multi user licence and hardcopy.

For detailed information, table of contents and pricing see:

About BuddeComm
BuddeComm is an independent global telecommunications research and consultancy company, specialising in new media, with 45 researchers spread across 15 countries. The company publishes more than 100 research reports each year analysing global communications markets, trends and business opportunities.

PAUL BUDDE Communication Pty Ltd,
T/As BuddeComm

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