Internet business models: copying the US isn't enough
By David Walker (Google profile)
Marc Johnson, head of Internet commerce research for US Internet consultancy Jupiter Media Metrix, has spotted several key differences between the US and Australian site-building environments. They seem at first to leave Australia at an overall disadvantage to the US - but the news may not be as bad as it looks.
- The Internet has penetrated the Australian audience almost as strongly as it has penetrated the US one: around 40 per cent of Australians are online, according to Jupiter. (An even higher number have the Web available to them in some form - for instance, at work.) Australian technologists love to cite our enthusiasm for technological devices, and they're right. We love gizmos.
- But when they get online, Australians spend more time on US sites than on Australian sites. There's no Australian online bookseller of note, for instance, because most Australian online bookbuyers end up at Amazon.
- Whether they're on US or Australian sites, Australians use the Web far less than their US counterparts. When you measure hours per day or minutes per session spent online, says Johnson, "there's a bit of a gulf" between the two countries. In fact, Australian usage of the Internet compares more closely to usage in "metered markets" like Japan and most of Europe, where you pay for modem-line use by the minute.
- Australians won't so willingly buy things over the Internet. "Sixteen per cent of Australians have said that they purchase online, which is very low," comments Johnson. Why so little online buying? In part, suggests Johnson, because a whole way of buying - catalogue shopping - has prepared US consumers for Internet commerce. Australians never experienced the likes of the great US direct marketing retailers like Sears & Roebuck, with its famous catalogue. We expect to buy stuff in shops.
Put all this together, and it's surprising that the likes of dstore and travel.com.au and the local version of Etrade have done as well as they have. Like the nation's farmers, battling depleted soils and the endless cycle of drought and flood, Australia's Internet commerce pioneers must be tough to survive.
So is it time to pack in the local Internet commerce game and let Amazon do all the transactions?
No. The tough local environment has been "a blessing in disguise", Johnson argues. With Australians so reluctant to transact locally, Australian sites have never been able to rely quite so heavily on the idea of scaling up from today's losses to tomorrow's profits. They've had to be more pragmatic about earning a few dollars.
The result: Australia's Internet-based businesses have pursued closer integration with the offline world. They have wasted less time, money and effort on fruitlessly pushing customers towards and all-online world. "Australia actually leads the way in the connection between online and offline," says Johnson.
The model for offline integration: Wishlist, which has signed petrol giant BP as a partner. Wishlist customers pick up their goods at BP, BP advertises Wishlist (gaining plenty of brand credibility in the process) and BP gets a commission on goods and a slice of the company. Johnson sees this as a great example of smart deal-making.
With a local Jupiter analyst now producing research, Johnson can summon up figures in support of his claim. For every Australian who buys online, he says, eight will use the Internet to study an eventual offline purchase - a group Jupiter calls the "online-influenced". In the US, the ratio is more like one-to-three. The larger online-influenced group, argues Johnson, is vital to the Web's commercial success - and Australia is leading the way in online-influenced commerce.