e-Commerce is exploding like a rocket

29 Jun

June 29, 2006

By Geoff Meeker

Were your perceptions of Internet e-commerce shaped by the dot-com crash of 2000?

If so, you are probably skeptical about the real potential of e-commerce and wary of doing business online. If that’s your opinion, then you’d better think again.

According to Michael Lee, Chief Strategy Officer with Rogers Communications, we’ve seen a “sea change” in the way people use the Internet.

Lee was the keynote speaker recently at the Nati (Newfoundland and Labrador Association of Technology Industries) FlatOut 2006 Technology Business Forum.

The dot-com crash of 2000 was inevitable, Lee explained, because there was an excess of companies selling online and a severe shortage of customers buying. That has changed over the last five years, he said.

“Connectivity over the last five years has been transformational,” he said. “And the next five years are going to be drastically different from the last five. Today, there are about one billion broadband subscribers worldwide… so now, when you have an opportunity, a new technology, service or product, and you have aspirations to go beyond the borders of Canada, you have a significant market to go after. In North America alone, we have about 55 million broadband households. That’s a significant number.

“When you (sell to) a small percentage of that large number, now you have enough money to put in the bank, reinvest in the product and make the product better. So in the cycle right now, those services that we see today in the marketplace are going to survive and thrive. Many of those ventures that failed in 2000 are going to come back and be reborn as meaningful, large companies.”

We are talking about more than potential here. The Internet is already an enormous revenue generator, with successful businesses pulling in billions of dollars. As an example, Lee held up Google, which earned $5.5 billion last year – and that’s actual revenue, not stock value (by comparison, broadcast TV earned $45 billion in ad revenue).

In Canada, Internet advertising sales were worth $519 million last year, which is closing quickly on the $616 million in revenue earned by the Canadian consumer magazine market.

“So it’s not a ‘concept’ market,” Lee said. “It’s a market that is growing at about 12 points per annum, while the magazine market is growing at probably 1 per cent per annum. And it’s going to be a much more significant market going forward.”

Lee also spoke about wireless (or cellular) communications, which is no surprise given Rogers’ high stake in cellular. But he offered some startling statistics that demonstrate some of the opportunities these technologies are creating. The global music market is worth $32 billion (US) annually. Of that, the ringtone business is now worth $4.25 billion annually, and growing. Think about that – $4.25 billion spent on cell phone ringer tunes.

“That is net new revenue that didn’t even exist five years ago,” Lee said. “It just puts in context how meaningfully large some of these new markets are.”

There are three points to draw from this.

First, if you’re a consumer who is still shy about buying online, I say: get over it.  The world’s largest shopping mall is just a click away.

Second, if you’re a business person who has no time for the Internet, wise up – your time may be running out.

Third, I know of several local e-commerce companies that were lost in the dot-com purge of 2000, even though many had strong business models. To them I say: don’t be shy – give it another go.


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