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February 22, 2008
Online shopping barriers

U.S. retail e-commerce sales reached almost $35 billion in the third quarter of 2007, according to the Census Bureau.

But only half of Americans have ever bough a product online, according to the Pew Internet and American Life Project, which surveyed what it would take to increase these numbers. Widespread fear of identity theft is the biggest problem that has to be overcome. Also, broadband connections are needed by those who still subscribe to dial-up for the online shopping experience to become more compelling.

  • If the three-quarters of internet users who agree that they don't like sending personal or credit card information online felt more confident about doing this, the share of the internet population shopping online would be 7 percentage points higher than the current average of 66%, or 73%.
  • If those who disagree that online shopping is convenient felt otherwise, the share of the internet population shopping online would be 3 percentage points higher than the current average (or 69% instead of 66%).
  • If those who disagree that online shopping saves time believed that they could save time by e-shopping, the share of the online population shopping online would be 2 percentage points higher than the current average (or 68% instead of 66%)....
  • Finally, higher broadband deployment would also drive up the size of the e-shopper cohort by 6 percentage points.
The full report, "Internet users like the convenience but worry about the security of their financial information" by John Horrigan, is available here.

Horrigan discussed the report during a forum at the Information Technology & Innovation Foundation.

August 10, 2005
Chasing the Long Tail's Virtuous Circle

The Internet has already deeply affected business models across the spectrum, from supply-chain management to consumer level e-commerce. But it will take real broadband to truly disrupt the visually oriented movie, television, and education industries. James Surowiecki of the New Yorker, in "Disk Averse," adds to the growing literature focusing on the "Long Tail" economy. Last fall Wired editor Chris Anderson wrote a groundbreaking article by that name showing that digitally oriented content sellers, who were not constrained by the physical scarcities of shelf space or spectrum, earned between 25 and 50 percent of their profits from unpopular products. The volume of niche content (books, movies, songs) is so large, Anderson showed, that it matches or excels the sales and profitability of mainstream, popular content. Amazon, Netflix, and Rhapsody all sell surprising amounts of mostly unknown books, movies, and music. Anderson concluded that if the broadcast, mass media era was built on "hits" -- bestsellers, chart-toppers, boxoffice smashes -- the digital Internet era will be built on "misses." Anderson's work was itself an outgrowth of George Gilder's 1990 book Life After Television, which described a "worldwide web of glass and light" that would empower consumers not just with choice but their first choice.

In his latest column, Surowiecki explains that Hollywood increasingly makes its money from DVD sales and that small and medium sized films, which cannot be safely marketed to mass audiences like the big-budget lowest-common-denominator action flics, are the big winners. Where movies used to earn 95 percent of profits in theatres, now it's just 20 percent. Young people go to the opening night movie for the social spectacle. Adults buy DVDs, later on and in larger volumes than boxoffice tickets, only if the content is worthy. DVDs are cheap to make and mail. DVD technology is thus catalyzing a virtuous circle in the film industry. Make smaller movies, which are inherently cheaper but which must be better quality in order to sell. Better x Cheaper = More Profitable.

An even cheaper way to get digital content into homes, however, is bit-carrying photons. The DVD may cost 50 cents to make -- inexpensive to be sure -- but the marginal cost of transmitting massless bits over optical fiber or coaxial cable is essentially zero. Unlike Netflix with a latency of at least 18 hours, moreover, broadband is immediate.

Delivering better quality content at lower prices, real broadband will thus be a huge boon to consumers. And to content producers. But as we've often said, and as John Wohlstetter notes below in his post on broadband IPTV, the federal and state regulators and local mayors and city councils who claim to seek consumer protection are in fact the biggest obstacles to this consumer paradise.

-Bret Swanson


When I was in Shanghai in the fall of 2003, I met with Jack Ma, the fast speaking Chinese entrepreneur who founded At the time, as we met atop the world's tallest hotel, the Grand Hyatt Shanghai in the Jin Mao Tower, Alibaba's chief business was an online supply-chain platform that connects China's many thousands of manufacturers, component and commodity handlers, and import-exporters. Now Alibaba also competes with eBay with a consumer online auction site and online payments (a la PayPal).

Today, Yahoo! is paying $1 billion for a 35 percent stake in Alibaba and will turn its Chinese operations over to Alibaba. eBay and Barry Diller's Interactive Corp. had already made deals to enter the Chinese ecommerce market. Last Friday, China's Google-like went public in a 1999-like rocket IPO approaching $1 billion but has since settled to a market cap of around $390 million.

Also today, China announced a few small steps in currency and capital liberalization and said its new basket of currencies against which it values the yuan includes the dollar, yen, euro, and won. It didn't, however, reveal the weights.

Our economies become more seamless all the time.

-Bret Swanson

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