World Internet Usage & Markets

IDATE has just published its new edition of “World Internet Usages & Markets” report. This report provides data and forecasts on Internet services markets – usage and revenue, by country and region. It covers Europe, North America and Asia, and analyses both the major trends in each segment and the market’s key players.

“The revenues of key services (online search, video-sharing, social networking and e-commerce) will experience double-digit growth, reaching more than EUR 108 billion for online advertising in 2016.” comments Soichi Nakajima, Project Leader and senior consultant at IDATE. “This solid growth will nevertheless be limited in 2012 by fears of a recession. E-commerce is another industry heavyweight, with smaller margins but with an estimated turnover of over EUR 1,300 billion by 2016”

The Internet economy

The revenues from the Internet economy considered in IDATE’s recent study are of three types:

1. Revenues related to advertising, which in 2011 accounted for almost EUR 53 billion worldwide
2. E-commerce, with a global turnover of EUR 717 billion in 2011, and operating margins obviously much lower than advertising
3. Revenues from fee-based services and content. This study focuses exclusively on feebased video services, which generated a turnover of EUR 3.7 billion in 2011.

1. The Online advertising market

The online advertising market is highly concentrated around a few support websites. Google accounted for nearly 50% of global income from online advertising in 2011 (almost EUR 27 billion). Facebook is still not terribly strong in this market, earning just over 3 billion EUR in 2001, only slightly less than Yahoo! whose income is tumbling. In order to better compete with Google, Microsoft and Yahoo! but also Facebook and Microsoft have in fact joined forces, strengthening the oligopolistic effect. Google, Facebook, Microsoft and Yahoo! are also major players in most national markets, with the exception of China – where Baidu and QQTencent reign supreme – and South Korea (NHN/Naver,Daum…).

The online advertising market is more fragmented upstream of the value chain: the advertising segment is rather dispersed, and the search marketing solutions, made affordable through high automation, make this advertising medium accessible to a large number of advertisers, even modest ones (SMEs). All major support websites (portals such as AuFeminin, news portals, ISPs, etc.) seek to develop their own advertising activity on the fixed Internet.

2. The E-commerce market

The turnover of e-commerce will continue to grow steadily, with double-digit growth rates, reaching more than EUR 1,340 billion in 2016. E-commerce still represents only 1% to 8% of retail sales and its growth will be fuelled by several factors:

An increasing number of Internet users (particularly in China);
An increasing number of Internet users shopping and paying online, particularly in countries where e-commerce is still relatively incipient, such as Italy and Spain;
An increase in the average annual purchase volume per buyer.
On the other hand, new sales strategies, including the integration with social networks or localised bundled offers (such as the successful Groupon website, which offers attractive local discount coupons whose validity is subject to a sufficient number of buyers).
Lastly, unlike advertising, e-commerce seems more immune to the financial crisis as consumers turn to the Web to find the best prices.

3.Revenues from fee-based services

Although the Internet economy is dominated by advertising revenues associated with free services, some players are able to charge consumers for value added services or digital content (as streaming or download).

Online video in particular is a major segment of online content, with a strong monetization potential through fee-based services, particularly with fixed access, and will continue to grow to represent a market of over EUR 12 billion in 2016 in OTT distribution (especially in relation to connected TVs).

The Emerging M-Commerce

Mobile commerce has emerged with the purchase of media content (ringtones, music, etc.). It will develop with other types of digital assets, such as travel and event ticketing. Physical assets are following, already representing more than 40% of m-commerce activities in Japan. M-commerce is particularly well represented in Japan, where it reached over EUR 10 billion in 2011. The other markets, still far behind Japan, should experience growth rates above 50% per year.

Market growth will be driven by different factors:

Deployment of broadband mobile networks (3G and LTE);
The spread of smartphones with easy browsing capabilities on mobile websites, and payment solutions adapted to the device;
Commercial strategies of online merchants, promoting the use of mobile services as an extension of their standard (i.e., fixed) website. EBay reports EUR 2 billion in revenues from mobile consumers in 2010, or 1.5% of its total turnover.