Globalisation now comprehends the movement not just of physical goods,
but also services, finance, people, information and ideas. As a result the
world is becoming ever more interlinked putting pressure on global, national
and local governance systems designed in a previous era by those with power and
influence at the time and, as trade agreements are negotiated, even now.
Technology continues to play an important role in communication, entertainment
and improving productivity. Convergence is leading to the merging of computers,
cell-phones, hi-fi, TV and other electronic devices, as well as the blending of
cable, wireless and satellite communication. The rise of outsourcing services
in countries such as India and the Philippines is underpinned by improvements
in the global telecommunications infrastructure.
The Internet plays a key role in all of this. Industry players are extremely active in producing new products and services, forming joint ventures or acquiring companies. Competition is fierce, particularly to gain access to the huge advertising revenues forecast. Litigation, protection of intellectual property and crime are all major challenges.
In the sections below, we list some of the key statistics and
developments for the two years prior to December 2007. To see how this fits
into our global outlook, we refer you to our
World overview. For more
recent information, we suggest you refer to the
MBendi Blog: Signposts to 2020 and the
twice monthly
MBendi
Newsletters.
The Internet continues to grow both website and user-wise. By way of
example, the blog search engine Technorati currently tracks 50 million blogs,
with 175,000 new ones created each day. While the size of Internet audiences in
North America and Europe grow more slowly as they reach maturity, Asian
audiences, particularly, continue to grow. In 2006 China's Internet population
increased 24% to 137 million people. By late 2006, Korea had an 80% broadband
penetration versus an OECD average of 13.6%.
The Internet is also causing changes in social and business habits. In
October 2006, Jupiter Research reported that the time Europeans spend online
now exceeds the time spent reading newspapers and magazines. Young audiences
are fast moving from traditional TV channels to user-generated music, videos
and pictures.
The newspaper industry is one that has been particularly adversely
affected by the advent of the Internet, both in terms of readership and
revenues. In 1956, there were 1.2 newspapers per US household per day; now it
is below 0.4 newspapers per household. Although world newspaper circulation
rose 2.3% in 2006, sales only rose in 30 of 200 countries surveyed with China
up 2.3%, India up 53% on 5 years and South Africa up 43% also in five years. US
newspaper readership dropped 2.1% between October 2006 and March 2007, the
fifth successive decline.
The past ten years have seen the integration of technology. In
particular we are now seeing Internet content increasingly being delivered over
phones as well as computers. In December 2007, O2 reported that 60% of the
company's iPhone users were sending or receiving more than 25 megabytes of data
via their phones each month. This is equivalent to 7,500 E-mails or 25 video
downloads from YouTube.
The size of cell-phone populations is thus an important metric. 2007 was
the first year in which US households spent more on cellphones than on
residential and payphones combined. As of June 2007, China had more than 500
million cell phone subscribers. Indian cell-phone operators added 7.3 million
new subscribers in June 2007 alone, with total users reaching 185.13 million
then. India has the cheapest cell phone rates in the world.
Advertising continues to be the major source of revenue, though Internet
companies are struggling to find models that are profitable. In September 2006,
the Interactive Advertising Bureau reported overall online advertising in the
USA rose 37% year on year to US$ 7.9 billion, 31% (down from 34%) of which was
display related. 1Q2007 online advertising revenues for US newspapers increased
22% to US$ 750 million, 7% of total advertising revenue of US$ 10.6 billion. By
contrast, print advertising declined, with classifieds down 13% due to a move
to Internet websites. Although total 1H2007 US advertising revenue dropped,
online ad revenue increased 23%. By April 2007, Internet advertising in the UK
and Sweden was ahead of advertising in national newspapers. Worldwide Internet
advertising was forecast to grow by 30% in 2007 while Informa estimated that
Mobile advertising will grow from US$ 2 billion in 2007 to US$ 11.3 billion by
2011.
Online Advertising, having moved from pay per view to pay to click is
now trying to move to pay for action to circumvent click fraud. Advertising
agencies are not embracing the Internet. The difficulty of hiring people who
know how to create, sell and measure Internet advertising is proving a
bottleneck.
Online shopping continues to boom. Shop.org estimated that 2006 online
E-Commerce in the USA, excluding travel, was worth US$ 146.5 billion, up 29% on
2005 and 7% of total retail sales. Clothing sales were worth US$ 18.3 billion,
more than the US$ 17.2 billion spent on computers. US online retail sales over
the November 2007 Thanksgiving weekend were 45% up on 2006.
As you will see in a later section, M&A activity in the Internet
sector continued apace. Private investment in European Web 2.0 companies more
than doubled in 1H2007 to US$ 51.5 million but US investment declined to US$
357 million. In January 2007, First Capital reported that venture capital
investment in European consumer Internet companies increased from GBP 24
million in 2005 to GBP 79 million in 2006. In February 2007, PwC estimated
European Internet M&A deals were up 75% in 2006. In addition to the frantic
M&A activity, numerous joint ventures were announced.
The Internet industry is particularly litigious, with most actions
concerning matters of intellectual property. Online fraud and crime continues
to be a problem. In November 2006, Gartner reported that 24.4 million Americans
had clicked on a phishing E-mail so far that year, up from 11.9 million in
2005. In November 2006, Postini estimated spam E-mail increased by 59% in the
previous three months, representing 91% of all E-mail. F-Secure detected
500,000 new viruses, trojans and worms in 2007, compared with 250,000 in 2006.
In late 2006, the International Federation of Phonographic Industries estimated
there were 40 illegal music downloads for each legal one. Apple's iPod and
iTunes accounted for 80% of legal downloads at the time.
In March 2007, a study by a group of universities showed that censorship
of the Internet is increasing with countries such as China, Iran, Turkey, Saudi
Arabia, Tunisia, Burma, Zimbabwe and Uzbekistan among the governments
restricting access to selected websites or content.
