Because Internet growth is exponential, not linear, opportunities in the Internet economy far exceed those available through any other opportunity — which also fueled not only the growth of Facebook and Google, but their acquisitions of Instagram and YouTube. Take a look at how the Internet economy is shaping up next year in this chart from the BCG report
And, they expect continued growth means the economic impact of the Internet economy will double in just 6 short years — between 2010 and 2016. Beyond 2016, exponential growth continues — shortening the time it takes for economic impact to double.
Developed markets in the US, Western Europe and much of Asia (including a surprising strong showing by South Korea) lead the way in the digital economy in terms of BCG’s e-intensity, which assesses a countries Internet infrastructure, online expenditures, and online engagement online, but new comers in Latin America, China, and the Middle East (except Israel, which maps to Western Europe in e-intensity), are leap-frogging directly into social the way they leap-frogged directly into mobile rather than land-based telephones.
Research versus buying online
We probably already knew this — or at least suspected it. The amount of money spend online is really tiny despite years when gurus predicted this would be the year when online sales (desktop and mobile) would take off. But, don’t underestimate the importance of online marketing and retailing. A large percentage of consumers do their research online, then buy what they want in the store — the brick and mortar kind. Mixed channels — using 2 or more channels — are common, especially in the US, where almost twice as much stuff is purchased in a brick and mortar (after researching online) as is purchased online.
Multichannel retailing goes the other way, too. With companies like Best Buy complaining about customers taking up time (and time IS money) shopping in the stores, then buying online. Shoppers even shop the price of an item right in the store before making a purchase. If they find a TV or Blu-ray for less on Amazon, there goes the sale.
Of course, not all research is intentional. We get recommendations from our friends all the time on social networks. It’s also common for folks to ask their friends for recommendations before buying. I recently had a friend ask whether to buy a Sleep Number or Temporpedic mattress to replace his existing foam mattress. We trust our friends because they don’t have any hidden agendas — they give it to us straight. This, of course, explains the true power of social media.
Not to mention all the brands building their image through social channels. Branding sends subtle messages about the positioning of the product and it’s suitability that have a subconscious influence on the brands we choose in both online and offline settings.
Even though a small number of purchases actually occur online (about 4.3% of GDP according to BCG), the power of the Internet in influencing offline purchases is enormous.
So, what does it all mean?
I’m glad you asked. The Internet economy impacts much of how we market businesses today. Like Klein said, its a belief system supported by technology, not a technology.
As an investor
You should probably think like Facebook and Google — investing in the Internet economy by building synergies with existing business and stopping competitors by gobbling them up. Stop investing the old way and supporting startups who are doing things the old way. Today, that probably means stop looking for the next Facebook or Google and, instead, look for firms like Instagram and YouTube who expand the internet economy.
Two suggestions — the Internet of things and email substitutes.
As a marketer
The Internet economy presents great opportunities, but also great challenges. Learn to harness the power of the Internet economy by putting on a different set of glasses than the ones you’ve used to view the world so far.
If you’re not online (and mobile-friendly), you’ve missed the boat. A digital presence is just the price of admission now. And, don’t go creating an app unless you provide some enhanced capability over your website. Just make you website mobile friendly. The high cost of keeping your app at the top in the app store is too high to do anything different.
Joining today’s Internet economy means becoming part of the new ecosystem — an ecosystem that’s consumer-driven, not like the one we all grew up in.
As a consumer
The Internet economy offers great opportunities to increase your buying power and get things that truly make your life better. Demand more from brands — make them earn your $$$$ every day. When they do something wrong, vote with your dollars to drive them out of business. If they offer greater opportunity, give them a try and tell your friends if it works out. We certainly need that more than sharing another cat video!