The Internet Economy Computer Science 01 i Introduction

The Internet Economy Computer Science 01 i Introduction to the Internet Neal Sample 6 March 2001 1

Today we will cover. . . • A short case study: the British online shopper • Making Money on the ‘Net • The new and perhaps improved, “Last Project” 2

Case Study: The British! • • Survey comes from Commerce. Net. 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. 3

Gender Split • Male to female users not too different from the US • Still no equity (3: 2) 4

Users, Shoppers and Buyers • 12. 1 million “users” • 6. 1 million “shoppers” • 3. 4 million “purchasers” 5

Differences from the US? 6

Male and Female Shoppers 7

Purchases Top Items Purchase by Top Items Purchased Males by Females Books: 953, 000 CD/Videos: 729, 000 Computers: 541, 000 Software: 464, 000 Travel: 356, 000 Electronics: 204, 000 Clothing: 138, 000 Books: CD/Videos: Travel: Software: Computers: Electronics: Clothing: 429, 000 249, 000 226, 000 91, 000 57, 000 51, 000 45, 000 8

Who buys the books? 9

Again, who buys the books? 10

Making Money on the ‘Net (Enough about the British, already) 11

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? 12

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? 13

Presto! And now, a couple of last year’s slides… 14

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? 15

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) 16

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. 17

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 18

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 19

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. Zebs. Hillbilly. Auctions. com? • Who else does auctions? • Is there any protection for the idea of a service? • What does this mean? 20

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? 21

Back to the new stuff… 22

Building though • According to a Meyers Group study, the top five factors considered in deciding whether to use online advertising are: § 81% § 77% § 74% § 60% § 56% Targeting Brand Building Click Rates to Corporate Sites ECommerce Audience Reach 23

Expected Advertising 24

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 25

What else is there? • Subscriptions fees § www. espn. com • Donations § http: //www. penny-arcade. com/ • Micropayments? § Reasons for? § Against? 26

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! 27