Internet Economy Just Beginning

In just a few years, observers will look back at today’s e-commerce as nothing but the “primordial ooze” necessary to develop the full-blown economy that is bound to emerge over the Internet, according to an analyst speaking at a recent International Data Corp. conference on the Internet economy.

There will be many losers along with winners in the Internet economy of the near future, as accelerating growth erases present-day conventions, said Frank Gens, IDC senior vice-president for Internet research, citing a new IDC survey of 650 business and IT executives.

“It’s pretty clear that the battle for Internet economy has just begun,” Gens said. “The guys who caught the wave of the first paradigm (of the Internet economy) may wind up being buried by the guys who come behind.”

A number of present-day trends reflect the hyper growth of e-commerce, he said. Among them are the following:

Internet users will become Internet buyers. Users will increase from 160 million in 1998 to 500 million in 2003, the survey showed. More dramatic growth was seen in commercial activity on the Internet, with purchases growing from US$50 billion in 1998 to US$1.3 trillion in 2003.

By 2003, 62 per cent of North American residents will be on-line, up from 26 per cent on-line today. In Europe, 44 per cent will use the Internet, up from 11 per cent in 1998. Worldwide, just 4 per cent of the population used the Internet in 1998, but by 2003, 11 per cent will have signed on.

Rapid growth will create other challenges for Internet businesses, Gens said. “We’ve seen skunkworks and spinoffs, but few (Web sites) have been fully integrated within the business organization,” he said. “E-business not integrated at the core business will be in trouble.”

Deep pockets will also be required to set up and maintain robust sites, according to the survey. “Organizations are now spending $1 million to $35 million to build sites,” he said. “Clearly, $7 (million) to $8 million is needed to get a world-class e-site up and running.” In addition, maintenance will be 50 per cent to 100 per cent of start-up costs.

The myth that Internet sites can stand to lose money as they gain market share will end, as companies demand and receive profits, Gens said. Two-thirds of businesses polled said they expect to make a profit by 2001. “The e-business (now being replaced) was generally unprofitable,” Gens said. “Internet business (of the future) better be profitable.”

Other speakers at the conference offered additional advice for creating successful e-commerce sites.

Older, less-educated and less-affluent people will use the Internet in the coming years, challenging Web developers to hold their attention, said Barry Parr, director of Internet and e-commerce strategies. “You have to make sites a lot more simple,” Parr said. “eBay, Amazon.Com and Yahoo are completely obvious sites that serve their users very well.”

Globally, companies should ensure their sites reflect local language and culture, said Jorden Woods, chief executive officer of Global SightCorp., a San Jose, Calif.-based software and consulting vendor for Web site development.

“Problems occur when you take (an e-commerce) site overseas and you haven’t thought about the environment you’re taking it to,” he said.