Countries covered: United Kingdom
The Internet is now used at home by 68% of UK adults — a penetration rate that continues to climb several percentage points each year (although some signs of market saturation are appearing). The fact that 68% of those adults who use the Internet `go online' at least once a day shows how quickly the World Wide Web has become part of everyday life in the typical UK household. This first edition of UK Internet Market focuses on consumer, rather than business, use of the Internet; among those adults who use the Internet, 93% do so at home, whereas only 32% do so in the workplace.
Although the concept of an Internet originated in the 1960s and reached mass-market status in the 1990s, the 2000s have brought significant improvements in the Internet experience for the consumer: fast broadband connections, interactive Web 2.0 technologies, and remote access using portable computerised devices (e.g. mobile phones).
E-mail is used by 87% of those with domestic Internet access, but communicating through websites — particularly `social networking' websites such as Facebook and MySpace — has become very popular. The rise of social networking in the 2000s has been remarkable, leading to the acquisition — at a high cost — of several leading websites by global media giants. In the latest example of this, in 2008, Time Warner spent $850m on Bebo, a social networking website that is phenomenally popular among teenagers.
Time Warner already owned the ISP (Internet service provider) AOL, in addition to its television, movie and publishing interests. Other multinational companies with Internet operations, almost all of them based in the US, include Microsoft, Apple and News Corporation. However, the Internet has also created large companies that specialise in the medium, such as Google (the dominant search engine), eBay (online retailing and auctioning) and Amazon (the pioneer of online bookselling).
UK organisations with a vested interest in the Internet include broadcasters such as the BBC, BSkyB and ITV. The BBC's iPlayer is the leading technology for `catching up' with television programmes that have already been broadcast, developing the convergence between television and the home computer. ITV offers a similar service and also owns the `reunion' site Friends Reunited.
E-commerce, or online shopping, is transforming the retail sector. However, some markets have been affected more than others. Travel is easily the largest online market, the Internet having underpinned the rise of the budget airlines (easyJet and Ryanair rely almost entirely on the Internet for bookings) and encouraging users to organise tailor-made holidays, rather than booking `packages' through a high-street travel agent. In contrast, online grocery shopping has yet to become a mass market. Generally, any business involving detailed information is suited to e-commerce (e.g. travel, house buying, insurance, books and tickets for events).
Information is itself a large part of the Internet market, ranging across government, education, health, job seeking, family history, weather forecasts and many other areas. Wikipedia, a charitable organisation funded by donations, has become the world's largest online encyclopedia.
With the exception of a few operators, such as Wikipedia, the funding mechanism for websites has shifted over the years from subscription fees to advertising. In 2007, the Internet accounted for 15.6% of all UK advertising expenditure (from a mere 2.9% in 2003). The market divides between advertisements on websites and `paid-for searches', where companies pay search engines such as Google to give their websites prominence.
Looking to the future, the economic crisis of 2008 and 2009 will probably reduce the growth rate for Internet advertising, but the medium itself will continue to play an increasingly important role in commerce and in consumer lifestyles. Key Note has identified three main future trends: convergence between the television and the computer in home entertainment and information; the fragmentation of mass markets as the Internet offers tailor-made options for entertainment; and a stimulus to live events and `socialising' generally, as the likes of networking, blogging and organising events via the Internet spread from the youth market to older consumers.
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