E-Commerce & Internet OVERVIEW
The global internet audience continues to grow steadily, with the worldwide base of broadband internet users (including fixed and wireless) standing in excess of 5.2 billion as 2022 began. This vast base of high-speed internet users encourages businesses to innovate in order to offer an ever-evolving array of online services. Thanks to the Coronavirus pandemic, even groceries have moved into the fast lane, as online grocery and household product sales are growing quickly while consumers enjoy same-day delivery options. The most powerful trends on the internet include access via smartphones, the migration of entertainment, including TV programming, to streaming services, as well as technologies based on software-as-a-service in the cloud.
The standout winner in ecommerce continues to be Amazon, where sales have soared thanks to aggressive pricing, free shipping for its “Prime” members and an ever-growing variety of merchandise. Most recently, the Coronavirus gave Amazon an exceptional shop-from-home boost. The firm’s sales outside of North America are booming as well, despite the fact that it has major foreign competition, particularly from companies based in Asia.
Analysts at eMarketer reported American ecommerce sales in 2021 of an estimated $933.3 billion (up significantly from $883.8 billion in 2020). This figure includes online retail product sales, travel sales and digital downloads, but not online gambling. Global internet ecommerce sales exceeded $5.54 trillion in 2021, according to eMarketer. China is posting phenomenal growth in ecommerce, up by 44.8% in 2020, according to analysts at eMarketer, to a total of $2.297 billion.
Digital advertising in the U.S., during 2021, was a projected $191.09 billion, according to eMarketer, up 25.5% from 2020. Mobile advertising was projected at $129.79 billion for the year.
Growth in broadband subscriptions worldwide continues at a strong pace. The number of American homes and businesses with broadband access capabilities topped 107.8 million by the end of 2021, according to Plunkett Research estimates, thanks in part to modest monthly fees at internet service providers. This number does not include mobile broadband subscriptions, estimated at another 287.2 million.
A Brief History of the Online Sector: The ecommerce and internet sector has evolved rapidly, going through several distinct stages since its beginnings in the 1970s:
The Internet Is Born: First, there were the early days, when the internet was seen by many as a realm for techies only, one that would produce few, if any, commercial enterprises. Initially designed in 1973, the internet was a series of communication protocols written by Vinton Cerf as part of a project sponsored by the U.S. Department of Defense’s Defense Advanced Research Projects Agency (DARPA). The first demonstration of a three-network internet protocol-based connection occurred in November 1977. Eventually, a well-enabled internet was rolled out in 1983, primarily as a failsafe method of defense communications and as a means for researchers at various universities to communicate.
The Web Is Created: Next, the World Wide Web and the coding language of HTML were conceived in 1989 and implemented between 1990 and 1993 by Tim Berners-Lee, enabling a never-ending hyperlinked cyber world where sharing unlimited data became user-friendly thanks to the magic of linked pages.
The Boom Ensues: Starting in 1993 and 1994, entrepreneurs and financiers realized that hyperlinked, electronically posted data could be commercialized with vast, global potential. Amazon.com was launched in 2004. A dramatic revolution in retailing, publishing and entertainment was visualized, one in which consumers and business people alike would eagerly pay for the convenience of online shopping, trading and viewing of published data. An economic boom ensued, the likes of which hadn’t been seen since the beginnings of earlier technological breakthroughs: electricity, the railroad, the telephone, the automobile and the passenger-carrying airliner.
Thousands of hopeful new businesses were launched. Capitalization for these new internet-enabled companies ranged from cash-strapped ventures launched in garages with Visa card credit lines, to companies like WebVan that received vast sums from professionally managed venture capital firms only to fail miserably. Roughly 6,000 new firms of significant size raised a cumulative total of more than $100 billion in venture capital in the boom period (1994-2000). About 450 of these companies sold their stock to the public via IPOs (initial public offerings). Stock markets soared and instant billionaires were made, although many of those stocks later plummeted. Venture funds that cashed out early reaped phenomenal gains, and financiers easily found additional investors for new venture capital pools. Companies with little or no sales and profits, led by the success of Netscape’s IPO, found eager buyers for their newly issued stocks. The NASDAQ index of stocks rose to 5,000 by early in the year 2000, and the Chairman of the Federal Reserve warned of “exuberant optimism.” Some said this boom couldn’t last—others said it was the beginning of a “new economy” that would last forever.
The Bust: In mid-2000, the internet industry entered a bleak and dreary phase after the NASDAQ collapsed in March, bringing the entire sector to its knees. By October 10, 2002, the NASDAQ was down to 1,108 from a high of 5,132 in March 2000. Hundreds of thousands of people lost their jobs. Stock portfolio values plummeted. Thousands of firms closed their doors, filed bankruptcy, downsized or were scooped up at bargain prices by competitors. Sellers of hardware, software, consulting and telecommunications services suffered mightily. Entrepreneurs found it nearly impossible to raise funds to launch or sustain their businesses. The dream of a “new economy” became a nightmare for some—profits still matter; business cycles still happen.
The Reality Phase: By early 2003, this sector’s dark clouds were abating, and a “reality phase” was taking shape. Well-conceived, internet-based businesses were proving their value. Consumers had become devoted fans of buying over the internet. Businesses of all types found that the internet creates true operating efficiencies and drives profitability (such as booking travel reservations online rather than through costly human agents). “Efficiency” is the most important factor in the ecommerce and internet sector’s newfound success. Consumers find the internet to be a terrific way to efficiently expend their shopping and banking efforts. Consumers of all types use eBay to look for bargains, autotrader.com to look for cars at great prices and iTunes to download music. Corporate procurement managers find the internet to be the most efficient way to purchase needed goods and inventory. Billions of people worldwide find e-mail, instant messaging and VOIP telephony to be the most efficient ways to communicate.
Low Costs Fuel the Steady Global Growth Phase: Today, access to fast internet, both wired and wireless, is available at bargain prices in a vast footprint across the globe. Even in relatively undeveloped nations, both consumers and businesses have grown to rely on the internet for everyday needs. Inexpensive devices and wireless networks continue to proliferate in much of the world. Mobile computing is accelerating at blazing speed thanks to moderately-priced smartphones and service plans, offering fast internet access and very advanced features.
Meanwhile, the cost of developing and maintaining web sites has plummeted, opening the door to millions of self-funded entrepreneurs, and making it easier for venture capital firms to fund startups using low amounts of cash. Trends such as open software and cloud computing, along with modular software development tools, have made it easier, faster and cheaper to start sophisticated web sites.