First, we had the Forrester Research report and Now the Durlacher report. I believe these numbers are through April, 1999. You might recall, Paul Myers recently said the number of X-Stream subscribers has doubled in the last four months.
In any event, at the time of the report, X-Stream is the 4th largest of all UK ISPs and the 2nd largest free ISP. Jeff
library.northernlight.com
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DURLACHER: Durlacher announces the release of its latest quarterly Internet Report
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Story Filed: Thursday, July 29, 1999 2:22 PM EST
JUL 29, 1999, M2 Communications - The advent of subscription-free ISPs such as Freeserve over the last 12 months has had a significant impact on the subscription-based market with annual growth slashed from over 80% to less than 1% and a decline forecasted over the next 12 months.
* Taking into account the fact that many users have multiple accounts (particularly the case with subscription-free services) and the high number of users per account for other ISPs, Durlacher estimate the total number of dial-up users has grown 66% over the last 12 months to 5.8m.
* Durlacher believe that the total number of internet users (including academic and business users) in the UK has now reached 10.5m. See tables below for top 5 players in each market. Please note that the two markets are not comparable.
UK subscription-free UK subscription-based
dial-up market dial-up market
Freeserve 1,250,000 32% AOL 600,000 29%
X-Stream 270,000 7% CompuServe 400,000 20%
Currant Bun 250,000 6% Demon 175,000 9%
breathenet 225,000 6% BT Internet 115,000 6%
Line One 200,000 5% Global Internet 100,000 5%
Other 1,735,000 44% Other 644,000 31%
Total 3,930,000 Total 2,034,000
* There are now over 95 subscription-free ISPs and Durlacher believe the number will rise to as many as 200 by the end of 1999. As anticipated, the widespread adoption of the subscription-free business model has forced considerable change in the UK dial-up market with traditional ISPs being increasingly forced to re-price, differentiate their service, add-value to their offering or face extinction.
* However, Durlacher's Nick Gibson believes that many subscription-free ISPs could face a similarly bleak future for a number of reasons. "Most subscription-free ISPs, including Freeserve, offer little to differentiate themselves and provide little or no barriers to exit for subscribers. As long as users can switch accounts so easily, free-ISPs leave themselves vulnerable to churn" said Gibson.
Internet penetration ramps 36.6% but only 1% of UK SMEs make full use of the internet's potential
Durlacher's Q2 Internet Report also featured the results of its latest UK SME research in which just under 1100 companies were surveyed. The results revealed that internet penetration amongst UK SMEs ramped up by 36.6% over the past 12 months to reach 76.6%. According to Durlacher's Sarah Skinner, "This growth spurt was supported by the uptake of subscription-free services by 15.7% of SMEs (15% of small companies and 16.2% of medium sized companies), the majority of which were first time users".
BUT
* Durlacher's new model for analysing internet technology adoption - e-Profiles (see methodology for more details) - highlighted a lack of investment in key internet technologies. Only 1% of small and medium sized enterprises classify as cutting edge users. The vast majority of the market is made up of 'power users' (14%), 'mainstream users' (46%), 'laggards' (15%) and 'non-users' (23.4%).
* 46.1% of UK internet-enabled SMEs still use a modem as their primary connection to the internet. This, in turn, was mirrored by low in-company internet penetration (38.7% of employees) and low uptake of high-end internet and e-commerce services (<10%).
* The e-Profiles also highlighted distinct sector differences in internet technology investment. These are largely mirrored by the industry sectors' success rate on the Web.
The Q2 report also highlighted the growth in importance of e- commerce as well as the potential for disintermediation (direct online sales to the consumer).
* 57% of internet-enabled retailers cite selling direct as the primary aim of their website whereas only 39% of wholesale/distributors and 28% of manufactures cite selling as the primary aim of their websites. The retail sector currently owns the customer relationship and are therefore experiencing more success with their websites than their counterparts in the manufacturing industry, who tend to focus more on backend systems and processes.
BUT
* Retailers have a lower internet presence than the rest of the supply chain. 66% of distributors/wholesalers (51% of total sector) and 67% of manufacturers (56% of total sector) have a web site compared to 61% of retailers (39% of total sector).
* 37% of Wholesalers (27% of total sector) and 22% of the Manufacturers (17% of total sector) indicated that they would offer transaction based services over the next 12 months.
Note on methodology
The SME e-Profiles model categorises companies according to their use of some of the key internet technologies (listed in Table 1). These rankings provided the base data to categorise SMEs into one of 5 usage profiles according to the percentage of criteria that they fulfilled: 'Luddites' are non-users followed by 'laggards' (1 to 25% of criteria fulfilled), 'mainstream users' (25 to 50%), 'power users' (50 to 75%) and 'cutting edge users' (over 75%).
Table 1: SME e-Profiles Criteria
Type of internet connection
Type of service level agreement (SLA)
In-house internet penetration
Intranet usage
Extranet usage
Presence of a website
Transaction based services offered on web site
Notes to Editors:
A subscription to the Durlacher Quarterly Internet Report costs GBP 195/annum. For more information about the reports, please contact Sarah Skinner on 0171 459 3691, sskinner@durlacher.com or visit the Durlacher web site at: www.durlacher.com
Durlacher Research Limited provides research and strategy consulting in the areas of emerging technology and media including internet, digital broadcast, telecommunications, computer and video games and convergence. Durlacher Research Limited is part of Durlacher Corporation Plc, a research-led investment bank based in the City of London.
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