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KN72020

KEY NOTE INTERNET USAGE IN BUSINESS SEPTEMBER 2000

Overview

ISBN 1-84168-118-0

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EXECUTIVE SUMMARY

This report considers business usage of, and spending on, the Internet. It also briefly covers related areas such as intranets. The focus of the report is on three areas: business spending on Internet connectivity, business spending on Internet software and services, and business revenues from the commercialisation of the Internet (i.e. revenues from Internet advertising and electronic commerce — e-commerce). The Internet market (covering connectivity, software and non-connectivity services) was worth around £1.64bn in 1999, and is predicted to grow to £2.66bn in 2000. The main sector of the Internet market was non-connectivity services and software (mainly services). Revenues from e-commerce and advertising reached £13.61bn in 2000, with both e-commerce and advertising growing rapidly. The key issues now shaping Internet usage include the following:

• Application service provision (ASP) is developing as a new revenue stream for Internet service providers (ISPs) and the major software companies.
• There is greater realism among investors about the long-term potential of ‘dotcom’ operations. This may slow the floatation of new dotcoms, but it will inject more financial scrutiny into the business plans of potential Internet companies.
• Electronic marketplaces are growing in importance in the business to business e-commerce sector.
• Many ISPs see the introduction of the next generation of Internet access devices and technologies, such as ADSL (asymmetric digital subscriber lines), cable modems and WAP (wireless application protocol) phones as potential sources of revenues, given that these new services are invariably paid for and are charged at a premium over standard analogue dial-up services.
• New legislation and legal developments are causing concern to ISPs and website owners. Specifically, the Regulation of Investigatory Powers Bill, the Demon Internet libel case and the new Data Protection Act all have serious implications as to how Internet companies will have to operate in the future.
• There are concerns about who controls domain name registration and the potential benefits and pitfalls of new domain name extensions such as ‘.shop’. In the future, the commercial exploitation of the Internet will be the main driver of the market. The Internet market (software, connectivity and non connectivity services) will be valued at £18.76bn in 2005, having grown by 605.1 percent between 2000 and 2005, with the main growth coming in non connectivity services.

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Last updated by Jacob van Eldik 24th October 2000