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2007 Global Internet - Volume 1 - Web 2 Revives Internet Economy


Attention: There is an updated edition available for this report.

This annual report offers a wealth of information on the worldwide development of the Internet economy. Volume 1 provides an insight and analysis into the trends and developments taking place, including initial statistics and forecasts for e-commerce. More detailed statistics on specific online activities are contained in BuddeComm’s other publication: 2007 Global Internet - Volume 2 - Online Content and Services. The report provides information on advertising in the new digital media era, as well as outlining possible industry business models. Also included is information on the leading Internet Media companies such as Google, Yahoo, News Corp, Microsoft, eBay/Skype, AOL, and Amazon. The report identifies the key areas of focus for the leading players, such as social networking and UGC, and provides example of the activities taking place. Volume 1 also incorporates information at a regional level for North America, Latin America, Europe, Middle East and Asia Pacific.

Report also contains:

  • Ecommerce analysis and statistics;
  • Digital Media advertising sector, including statistics and forecasts;
  • Industry business models;
  • Net Neutrality analysis;
  • Social Networks and User Generated Content (UGC) overview and statistics;
  • Internet Media companies;
  • Regional overviews.
Please Note: There is an update to this report.


The emergence of the next generation of Internet technology and applications has led to the coining of the term Web 2.0, to indicate that the Internet now has more capabilities than ever before. The Internet Media companies such as Google, News Corp and Yahoo are just some of the leaders taking advantage of this with the introduction of new services and applications. This revival of the Internet has also led in part to the re-emergence of the Internet economy, and more specifically e-commerce. The increase in broadband connections is another factor that has led to this revival. For more information, see chapter 1.1.1, page 1.

Revenue from the large range of content and services available from the Internet is rapidly increasing globally; travel, gambling, adult content, music and health services are particularly popular and social networking services are flourishing. By 2010 it is estimated that over $2 billion will be spent on social network advertising in the US alone. The Internet economy is increasingly relying on the underlying Internet infrastructure for its success, and this has also opened up a range of new support functions for ISPs and BSPs, with some already beginning to diversify their operations.

New video applications have also emerged as the Internet media companies seek to exploit the added speed and capacity of broadband infrastructure. This will result in a whole range of applications continuing to enter the market over the next decade. As can already be observed, the killer application on these networks is video based communication, nearly half of which is produced by users themselves. Commercial video entertainment will eventually account for only a quarter of these services. Sites that started as social networks, such as Facebook, are also expanding into video based services in order to compete. As commercial websites try and enter this space, there is no sign of this growth abating. For more information, see chapter 2.3.1, page 58.

Web 2.0 technologies have shifted the consumer’s web experience to interactive and collaborative applications which a growing number of people can access and contribute to. Online payment gateways such as PayPal have facilitated consumer use of e-commerce, facilitating services coming to market. The success of social networking and sites based on UGC clearly shows that the ‘consumer-led’ era has begun and this heralds the end of those with vested interests being able to control what they present to their users. In future consumers will be not only be able to actively participate; they will also be in a position to challenge the way things have been done in the past and expose failures and misconduct.

A key to success in this new era of digital media revolves around advertising and the ability to attract new revenues. We are now seeing the emergence of new business models as the industry gains confidence and begin to change their more traditional models. Driving this confidence is the phenomenal growth in online advertising revenues. It is estimated that over $25 billion dollars will be spent worldwide on online advertising this year. For more information, see chapter 1.2.1, page 13.

E-health is also rapidly shaping up as one of the key killer apps on the truly high-speed broadband networks. Around the western world we are facing a massive dilemma in relation to healthcare. New technologies are increasing life expectations and improving our lifestyle. The cost of this however is enormous, and we simply can no longer afford to finance these huge advances through the public health systems. In countries with proper broadband infrastructure we see e-health shaping up as a way that will allow us to enjoy these advances in medical technology and medical services, at a more affordable cost.

The Internet has joined the road and rail networks, the postal system and the global telephone network as a vital communications system in developed countries. The principle known as ‘Network Neutrality’ allows Internet users to access any web content or applications they choose, without restriction or limitation. This is taken for granted by the billions of people who access the Internet worldwide. However a concerning precedent is taking place in the US, where carriers would like to be able to charge for tiered network service - and it will have global implications if it succeeds. However despite the importance of the issue, it may be some time yet before the US government determines the country’s net neutrality path. For more information, see chapter 1.4, page 29.

This report provides an insight and analysis into the trends and developments taking place in the revived Internet economy. It includes initial statistics and forecasts for e-commerce, with more detailed statistics on specific online activities contained in BuddeComm’s other publication: 2007 Global Internet - Volume 2 - Online Content and Services. The report provides information on advertising in the new digital media era, as well as outlining possible industry business models. Also included is information on the leading Internet Media companies such as Google, Yahoo, News Corp, Microsoft, eBay/Skype, AOL, and Amazon. The report identifies the key areas of focus for the leading players, such as social networking and UGC, and provides example of the activities taking place. Volume 1 also incorporates information at a regional level for North America, Latin America, Europe, Middle East and Asia Pacific For more information, see chapter 3, page 67.

Key Highlights:

Internet users are spending more of their time online viewing news and entertainment, overtaking email which has been the preferred online activity in the past.
Broadband is an essential element of the Internet economy as it is a telecommunications infrastructure concept that allows for the high speed electronic distribution of voice, data and video information. Broadband applications include tele-education, tele-health, e-commerce, entertainment and personal communication service with family, health care workers, educators, government, business relation, etc.
Examples of Web 2.0 developments

Instant Messaging;
New traffic patterns ie Peer to Peer (P2P);
Wikis - ie sites where users build up a source of content by adding, removing and editing text;
Really Simple Syndication (RSS) - a standardized form of XML used for syndicating Web articles ie online news;
Blogs, Social networking and User Generated Content (UGC);
New business models ie Pay-Per-Click advertising.
(Source: BuddeComm 2007)

There is speculation that the e-commerce market may be maturing, as a slowing down of online spending has been detected in 2007, particularly in the US. While there is still growth ahead, growth rates may drop to around 10% per year before the end of the decade, rather than over 20% as recorded in recent years.
User-generated online videos make up almost half of the total online video market.
For many years, Google has had the lion’s share of the search engine market and as a result, it attracts a large proportion of advertising revenues (over 30% in the US in 2007). For more information, see chapter 2.1.1.1, page 36.
Internet blogs and social networks are starting to provide significant social and political forums throughout Asia, sometimes offering an important alternative to the main stream media. This has become increasingly critical in those countries with repressive regimes. In September 2007, bloggers in Myanmar for example were getting important news to the world during the military junta’s violent crackdown on the peaceful demonstrations by monks and the wider population. For more information, see chapter 3.5, page 81.
Europe’s strong e-commerce potential is founded on an Internet user base of more than 320 million. Several countries have Internet household penetration of 75% or higher. For more information, see chapter 3.3, page 68.
Although blogging, wikis, and forums are gaining widespread popularity throughout Latin America, the development of Web 2.0 communities differs from country to country, depending on variations in technological and cultural backgrounds. For more information, see chapter 3.2, page 67.
The relatively affluent Northern African countries as well as South Africa are the leading Internet economy markets in this continent. For more information, see chapter 3.4.1, page 76.

1. INTERNET ECONOMY
1.1 Internet economy overview
1.1.1 Measuring digital media revenues - analysis
1.1.2 Internet advertising
1.1.3 Mobile advertising analysis
1.1.4 Market developments
1.1.5 Advertising statistics and market trends
1.1.6 Dubious ‘advertising’ tactics
1.1.7 Advertising and the digital media - analysis
1.1.8 Interactive advertising
1.2 Internet economy and advertising
1.2.1 The key drivers of growth
1.2.2 Market overview
1.2.3 The role of service providers
1.2.4 Internet economy analysis
1.2.5 Business models for content providers
1.2.6 Internet economy statistics and forecasts
1.3 Internet business models
1.3.1 The role of the telcos
1.3.2 The role of the broadcasters
1.3.3 The role of the content providers
1.3.4 The role of the IT industry
1.3.5 Broadband Service Providers (BSPs)
1.3.6 Internet economy based business models
1.4 Net neutrality
1.4.1 Introduction
1.4.2 Network neutrality - a global issue
1.4.3 Carriers in competition with content providers
1.4.4 Network neutrality and non-discrimination
1.4.5 Developments in the USA
1.4.6 No-one owns the Internet
2. DIGITAL MEDIA
2.1 Internet media companies
2.1.1 Introduction and analyses
2.1.2 Internet media companies
2.1.3 Key areas for Internet media companies
2.1.4 Other initiatives
2.1.5 Noteworthy alliances
2.1.6 Online advertising activities
2.1.7 Copyright becomes as issue
2.1.8 Internet media bypassing the telcos
2.2 Social networks and User Generated Content (UGC)
2.2.1 UGC
2.2.2 Analysis - just a craze?
2.2.3 Other developments
2.2.4 Statistics and forecasts
2.3 Online video media
2.3.1 Video streaming/web tv/video
2.3.2 Focus shifts to web tv/video
2.3.3 New emerging business models
2.3.4 Personal video services
2.3.5 Other developments
2.3.6 Video media statistics and forecasts
2.3.7 The International Webcasting Association (IWA)
3. REGIONAL OVERVIEWS
3.1 North America
3.2 Latin America
3.3 Europe
3.3.1 Western Europe
3.3.2 Eastern Europe
3.4 Africa / Middle East
3.4.1 Africa
3.4.2 Middle East
3.5 Asia
3.5.1 Market overview
3.5.2 Cultural and regulatory issues
3.5.3 Internet advertising
3.5.4 Asian Domain Name Dispute-Resolution Centre
3.5.5 Internet access and infrastructure
3.5.6 ISP market
3.5.7 ASP market
3.5.8 Intranets and extranets
3.5.9 e-Government
3.6 Pacific region
3.6.1 Australia
4. GLOSSARY OF ABBREVIATIONS


List of Exhibits


Exhibit 1 - Digital media marketing commandments
Exhibit 2 - Examples of Web 2.0 developments
Exhibit 3 - Implications of ending net neutrality
Exhibit 4 - Media centre devices
Exhibit 5 - Implications of ending net neutrality
Exhibit 6 - Examples of leading Internet media companies - 2007
Exhibit 7 - Social network and community definition
Exhibit 8 - User Generated Content - key success factors
Exhibit 9 - Wikipedia
Exhibit 10 - Examples of social network/UGC websites - 2007
Exhibit 11 - Equivalence between access modes and traditional audiovisual use
Exhibit 12 - The ‘One Laptop per Child’ project
Exhibit 13 - Intermix Media and MySpace


List of Tables


Table 1 - Percentage of worldwide advertising spend on Internet versus other media - 2006; 2009
Table 2 - Worldwide Internet advertising spending versus overall advertising spending - 2006 - 2009
Table 3 - Global advertising expenditure by region - 2004 - 2008
Table 4 - US ad spending on social networking sites - 2006 - 2007; 2010
Table 5 - Worldwide ad spending on social networking sites - 2006 - 2007; 2010
Table 6 - Percentage of total US online ad spending - top four portals - 2006 - 2007
Table 7 - Regional Internet advertising and access revenues - 2010
Table 8 - Regional Internet advertising revenues - 2010
Table 9 - Share of online display ads - top 3 US websites - 2005 - 2006
Table 10 - Media platform that US consumers use for major news event - October 2006
Table 11 - Online users and other media usage
Table 12 - Business model examples - 2007
Table 13 - US online spending revenue for top product type (excluding travel) - 2006 - 2007
Table 14 - US online spending revenue for top 5 product types - 2006
Table 15 - Amount spent online by US consumers - 2004 - 2005
Table 16 - Percentage of online searches conducted on four leading search engines in the US - January 2007
Table 17 - Percentage of online searches conducted on leading search engines in the US - 2006
Table 18 - Global market share of Google and Yahoo - November 2005
Table 19 - Worldwide IM users by top 10 providers - 2005 - 2006
Table 20 - Revenue market share of total US online advertising spend - Google, Yahoo, AOL, Microsoft MSN - 2006 - 2007
Table 21 - US ad spending on social networking sites - 2006 - 2007; 2010
Table 22 - Worldwide ad spending on social networking sites - 2006 - 2007; 2010
Table 23 - Unique visitors to the most popular blogging service worldwide - 2005 - 2006
Table 24 - Unique visitors to top 3 US blogs - May 2006
Table 25 - Unique visitors to top 10 US social networking sites - May 2006
Table 26 - Online video streams & market share of top 10 online video sites in US - May 2007
Table 27 - Online video subscription spending in US - 2007; 2011
Table 28 - Online video streams & market share of top 10 online video sites in US - August 2006
Table 29 - Europe - broadband access lines by type; penetration - March 2007
Table 30 - Household Internet access and PC penetration of Eastern European EU countries - 2005 - 2006
Table 31 - Broadband connections and penetration of Eastern European EU countries - March 2007
Table 32 - Online services takeup - Eastern European EU countries - 2006
Table 33 - Reasons for no household Internet access in Eastern European EU countries - 2006
Table 34 - E-commerce usage in Eastern European EU countries - 2006
Table 35 - E-business usage in Eastern European EU countries - 2006
Table 36 - E-government usage by citizens and businesses in Eastern European EU countries - 2006
Table 37 - E-readiness of Eastern European countries - 2006
Table 38 - Internet users in Africa - 1995 - 1996; 1998 - 2006
Table 39 - Top five African Internet markets - users, annual growth, penetration & ISPs - 2006
Table 40 - Internet users, penetration and annual growth in the Middle East - 2006
Table 41 - Internet user growth in Asia - 1999 - 2007
Table 42 - Top 10 Asian countries by Internet user penetration - 2006
Table 43 - Internet and broadband subscribers for selected Asian markets - 2006

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