Under the iceberg’s tip

By Simon van Wyk

The revolution loudly proclaimed and then just as loudly declaimed has now taken place, argues Simon van Wyk.

The Internet has now been out of the news headlines for a couple of years.

The funny thing is, during that time it has quietly but steadily been fulfilling those ridiculous predictions about fundamental business changes that led to the rapid expansion and then explosion of the Internet bubble.

Tom Peters wrote recently in Fortune that the work being done on the Internet over the past several years has been on the 90% of the iceberg below the surface. The Internet bubble was all about the bit sticking out of the water; the last three years have been about building a strong foundation below the water line.

Looking at the impact of the Internet on the way business is now done worldwide, compared to even five years ago, I have to agree with Peters’ assessment. Here are some recent statistics on Internet use and ecommerce and their affect on traditional business and media that point towards business effects that I can only call astonishing:

  • Online retail sales in the US are expected to grow to more than US$94 billion this year (Jupiter Research).
  • Daily US newspaper circulation in 1982 was 62.5 million; in 2002 it was 55.1 million (Scarborough Research/NAA).
  • C-level (those with a “chief” in their title) executives’ most important source of business information is the Web (38%), followed by daily newspapers (26%, industry trade publications (17%), magazines (8%); TV (7%) and radio (4%) (GartnerG2).
  • The Internet is the top media source “influentials” use to research places to visit (86%) or things to buy (82%) (RoperASW).
  • Virtually all affluent adult shoppers (HHI $100K+) use the Web to make or research their purchases. For automobile, computer and travel purchases, Internet use is extraordinarily high (>90%) (Nielsen/NetRatings).
  • Teens and young adults spend more time with the Web than various other media: online (excluding e-mail), 16.7 hours/week; TV, 13.6 hours/week; reading books/magazines (not scholastic), 6.0 hours/week (Harris Interactive).
  • For car buying decisions, search engine advertising (26%) is a stronger influence than television ads (17%) (Cap Gemini Ernst & Young).
  • Email marketing campaigns (especially those directed to existing customers) produce dramatically better return on investment (ROI) (14.2) than any other method, with daylight second, followed by direct response TV (8.4) and direct mail (7.2) (Direct Marketing Association).
  • Email campaigns cost an average of $0.09 per contact, while direct mail cost $0.55 per contact. Only free standing inserts, at $0.06 per contact, were cheaper than e-mail, but they also had a much lower response rate (Direct Marketing Association).
  • 56% of US small businesses attribute some portion of their annual sales to having an online presence, while 78% say they benefit from having a website and 33% say it is their strongest marketing tool. 23% say up to 10% of total sales come from their website, while a staggering 12% say between 76% and 100% of their sales come from the Internet (Interland).
  • Nearly half of all American adults say they looked for product information online in the past year, totalling more than 103 million shoppers. More than 75 million are using search engines to find products. The average number of online transactions per year of online purchasers is three times the average number of transactions per year made by mail order shoppers (Dieringer Research Group).
  • 23 million Americans spend $500 or more both online and offline after first seeking product/service information online - up 50% from 2002. This group, labelled “hyper-shoppers”, rate Web sites as their most valuable way of obtaining product information. Half say the Internet allows them to find better prices and one out of five say it allows them to spend more time with their families. Nearly two-thirds of all hyper-shoppers say the value of the Internet to their purchase decision-making increased in the past 12 months. (Dieringer Research Group).
  • Worldwide CD sales have declined by 15% p.a. over the past couple of years, with much of the blame lain at the feet of online file-swapping services such as Napster and Kazaa (Recording Industry Association of America). In a related statistic, the world’s largest record company, Universal Music, has slashed the wholesale price of its recorded CDs by 30% across the board, also citing the impact of online music sites as the biggest reason for its decision.
  • Traditional newspaper classified advertising is in steady decline in Australia and around the world, and a continuing migration from offline to online classified services such as Google, Yahoo and eBay is predicted because of factors such as ease of use, breadth and depth of listing, compelling value proposition for sellers and cost-effective online transaction platforms (i-searchenginemarketing.com)

As Larry Everling argues in a recent article in ClickZ (where he did the hard work in gathering several of the statistics quoted above), “What will it take for everyone to recognize the massive shift in media consumption to the Web? How much data are needed to unshackle thinking that remains rigidly fixated on decades of increasingly unsupportable conventional wisdom?”

In 1999, the Internet loudly and brashly announced that the revolution had arrived. By the middle of 2000, that was revolution was proved to be powered largely by hot air. But now, late in 2003, the Internet has stealthily slipped under the publicity radar and taken over the city of commerce.

And as the boosters rashly predicted late last decade, it is those businesses that embrace the online world that will be the ones who survive into the current century.