To all, interesting read re: e-commerce taken from another thread...compliments of Jay Kells. I think it applies to STEN.
The biggest category of growth in this area is now being driven by children and it is the purchase of video games and music where the music is steamed and downloaded or the video games are.
Read on here's the entire message:
Selected Segments from a Speech from Mr Ira Magaziner.
- Senior Advisor on Policy Development to the President of the U.S.A.
17 April 1998
Speaking of the Internet..........
We believe that this is a real phenomena. It is already beginning to affect what we can observe in our economy, in our own society, and we are very clear as we look at it, that it is just the beginning. Let we describe to you what we are observing and what our recent study has shown us. We have found that the actual building out of the Internet which now, as you know, about four years ago had about three million people on it, and today has about 100 million people on it. And the networking of the computer systems, which now essentially is commonplace, has already driven about one third of the real growth of the US economy over the past three years, and that is just the direct effect of the building out of the information infrastructure. It does not include indirect effects which would make it much higher. One third of the real growth of the economy.
....................
ou have to look back over 100 years to see a similar effect, and even then the effect is not as significant. And that affect came with the beginnings in the mid-1800s in the building out of the electrical grid, and the deployment of motors, electric motors in factories. And even that did not have as significant effect as this did. By way of comparison the automobile industry which has driven US economic growth has never been more than 4 per cent of the economy, and information technology is already over 8 per cent. Construction, which has been the other major bell weather by which we measure the success of the economy is also under 4 per cent. So less than half of the information technology industry.
Now what is really impressing us as we move forward in this is that it is quite clear that investments already being made are going to cause the Internet to build out to a billion people by the year 2005. So as we went from 4 million to 100 million we have experienced this kind of affect. Now we are going to go from 100 million to a billion in the space of roughly about six or seven years at most. So we can see that trend accelerating.
Traffic on the Internet, the actual amount of bits, if you will, that is getting transmitted is doubling every 90 or 100 days. So the number of people coming on is doubling every year. But the traffic is doubling every 90 to 100 days as people obviously use it more. So what we anticipate is that the growth and the building out of the information technology infrastructure, if anything, will accelerate.
It will become, if anything, a more important part of our economy.
....................
Now, electronic commerce. The actual building out of the Internet is occurring for a number of reasons. It is occurring because of entertainment value. It is occurring because of communication. It is occurring for research for news. It is replacing television. What our surveys show is that the children who are bringing the Internet into the home are replacing television time primarily with Internet time. Or in some case telephone time with Email time on the Internet.
I think culturally one would have argue that is a step up. It could not be much of a step down from television. At least on the Internet they are interacting in some way. It is not a completely passive activity, and less opposed to talking on the telephone at least on the Internet they are communicating with a multiple number of people and they have to usually compose something that involves at least a certain number of words. So in any event it is a replacement which is not degrading the culture as far as we can
tell. But it is occurring.
....................
Electronic commerce we think will be the major driver that is going to cause an acceleration in what I have just described to you. When we talk about electronic commerce there a couple of things we are observing. The most significant usage which was begun about a year and a half to two years ago in the United States and now is spreading at a rate almost unbelievable, and that is the business usage of electronic commerce.
Consumers are still nervous about making payments on the Internet. They are nervous about being able to protect their privacy. The developments we are seeing are being driven at opposite ends of complexity. The biggest category of growth in this area is now being driven by children and it is the purchase of video games and music where the music is steamed and downloaded or the video games are. On the other extreme we now have about 10 million people doing their retail banking on line. And if you have not seen these studies there are only a couple of banks that have really developed this so far, but what they find is where it costs over a dollar to process a cheque, if you work through a bank teller in a bank it costs less than a penny to process that on the Internet. So there is tremendous saving potential as well as convenience for the consumer. We expect that that 10 million will go up to about 15 to 20 million by the year 2000. About 7 per cent of all airline tickets sold in the United States next year will be sold and delivered on the Internet electronically, up from zero two years ago. That is also taking off. And also insurance policies, the sale and delivery of insurance policies. So there are range of services like that that are just beginning and which we think are going to grow very rapidly in the coming years.
...................
The final area of electronic commerce which is new but is going to be very significant is the use of direct marketing and advertising to affinity groups where the direct marketing and advertising can have a more efficient rate of realisation than is normally the case in direct mail or in television advertising. There are businesses that are growing up about these affinity groups. We had at the White House when we released our strategy last July representative of a company called Parent Soup, that you may have heard of. It started out as a discussion group on the Internet, a chat room, among new parents. Those of you who have had young children know that sometimes you are up at odd hours of the night so they started talking to each other on line, parents with screaming kids on their laps, and eventually it grew, with a year and a half, it grew into having 50,000 people in this chat room. Half of them were in the United States, half of them were outside the United States. Interesting enough the company was based in New York.
...................
So people say, for example, "Well, Amazon hasn't made money." Amazon could have made a 30 per cent return last year but its venture capitalists who are supporting it financially urged it to instead invest all of that money in advertising to build brand damage. Because as Barnes and Noble and Borders come into the business Amazon needs to build its market share.
- Mr Ira Magaziner
----------------
regards,
Andretti |
