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John Simkin

Economics of the Internet

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There has been some interesting articles about the changing economics of web publishing. It is clear that multinational corporations made some terrible mistakes by investing heavily in websites during the dotcom boom. As a result, most corporations changed its view of the potential of the web. This was a serious mistake as well. Rupert Murdoch recently admitted that he was guilty of making both mistakes and is now busily investing in the web.

What has caused this change of attitude? The most important reason is the increasing amount of goods and services being purchased online. This was highlighted by the sales over Christmas. In the UK there are more than 32 million online at home. A growing percentage spend more time online than they do listening to the radio. On average people in the UK spend double the time online than the time they spend reading newspapers and magazines. Over 16 million shop online.

Large corporations are discovering that they are losing out to online operations. In recent weeks the New York Times paid $410 million for About.com, Dow Jones ($528m for Marketwatch) and IAC ($1.85bn) for Ask Jeeves.

The fact that people are buying online means that large corporations are increasing the amount of money it spends on online advertising. Online advertising has overtaken radio in total spend. It will not be long before it overtakes newspaper advertising. This is what is scaring Rupert Murdoch. Online advertising is already destroying local newspapers. It will not be long before the same thing happens to newspapers. The decision by the Guardian to make its online newspaper free of charge is now providing dividends. More people read the Guardian online than all the other newspapers combined. It now gets considerable revenues for the advertising it pages carry.

Online advertising is now completely dominated by Google. That is why you are seeing so many adverts on television for MSN Search and AskJeeves. However, I suspect it is all too late for them. Google is already trusted as providing the best search-results. As long as they don’t lose this reputation they are in a position to make their shareholders very rich people.

This has also changed the economics of websites providing free content. They are in a position to make good money via Google over the years to come. This will be the final nail in the coffin for subscription websites. Those early pioneers who saw the web as a means of challenging the media monopoly of the multinational corporations have been victorious. However, this is only the beginning. Ideologues like Rupert Murdoch are reorganizing. It is going to be very important for the right to get back its media monopoly.

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The observations made are quite significant.

Some predictions are also made.

When I started making blogs I was amused that why google was providing such a large space on cyberspace without charging any money.

I think they have made this move with a business model which justify predictions made above.

What I understand that online facilities are going to adjust into life more fast. Even in a country like India, where the government is fighting with the menace of black money and parallel economy, the card money and online payments are now being gradually accepted a more better option.

These google people are smart. They know that the advertisement will gradually move towards online trading. With new means like browsing through your mobiles, it will soon become a regular feature. They need a space on the net where they can allow the advertisements of their clients. If they have to employ the web designers and provide different and varied contents, they had to employ a huge staff. But they have permitted all to create their own blogs. Then they encourage them to use their Adsense feature. They are getting varied contents and each content is bring is own audience and customer.

Even this forum had gone for their Adsense feature. When Andy made a suggestion about these ad features, I was prompted to write a joking comment on that.

I believe that these predictions will soon become true. It will definitely change economics of advertisement, marketing, and market research methods.

I hope some member with understanding of media must give views on this aspect.

The predictions

There has been some interesting articles about the changing economics of web publishing. It is clear that multinational corporations made some terrible mistakes by investing heavily in websites during the dotcom boom. As a result, most corporations changed its view of the potential of the web. This was a serious mistake as well. Rupert Murdoch recently admitted that he was guilty of making both mistakes and is now busily investing in the web.

What has caused this change of attitude?  The most important reason is the increasing amount of goods and services being purchased online. This was highlighted by the sales over Christmas. In the UK there are more than 32 million online at home. A growing percentage spend more time online than they do listening to the radio. On average people in the UK spend double the time online than the time they spend reading newspapers and magazines. Over 16 million shop online.

Large corporations are discovering that they are losing out to online operations. In recent weeks the New York Times paid $410 million for About.com, Dow Jones ($528m for Marketwatch) and IAC ($1.85bn) for Ask Jeeves.

The fact that people are buying online means that large corporations are increasing the amount of money it spends on online advertising. Online advertising has overtaken radio in total spend. It will not be long before it overtakes newspaper advertising. This is what is scaring Rupert Murdoch. Online advertising is already destroying local newspapers. It will not be long before the same thing happens to newspapers. The decision by the Guardian to make its online newspaper free of charge is now providing dividends. More people read the Guardian online than all the other newspapers combined. It now gets considerable revenues for the advertising it pages carry.

Online advertising is now completely dominated by Google. That is why you are seeing so many adverts on television for MSN Search and AskJeeves. However, I suspect it is all too late for them. Google is already trusted as providing the best search-results. As long as they don’t lose this reputation they are in a position to make their shareholders very rich people.

This has also changed the economics of websites providing free content. They are in a position to make good money via Google over the years to come. This will be the final nail in the coffin for subscription websites. Those early pioneers who saw the web as a means of challenging the media monopoly of the multinational corporations have been victorious. However, this is only the beginning. Ideologues like Rupert Murdoch are reorganizing. It is going to be very important for the right to get back its media monopoly.

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The Economics of the Internet?

This is a sore point for me this week. Having left my daughter in charge of my business while I went on holiday, I returned to find that we had been robbed of 2000 pounds as a result of a very convincing transaction emanating originally from Nigeria but negotiated in response to emails sent via Australia and the Czech Republic. Essentially it was a case of credit card fraud. Watch out for this fraudster:

BEN MARK

35 SHOKUNBI STREET

OFF POST OFFICE ROAD

MUSHIN

LAGOS

NIGERIA 23401

Two credit card transactions initiated by Ben Mark appeared to go through without a problem, but later we were informed by Barclaycard that the credit card numbers he had used had been stolen and the sums of money paid into our bank in respect of two transactions had to be paid back to Barclaycard. Note: Only the numbers of the credit cards had been stolen, not the cards themselves. A fraudster only needs to obtain the credit card number and expiry date, not the card itself. The fraudster is gambling on receiving the goods before the real owner of the credit card number notices that a fraudulent transaction has taken place. In such a situation the bank never loses; only the business that has fallen for the scam loses.

Businesses have to be more and more careful about who they deal with and how they deal with them. I am informed by business colleagues who have suffered losses in a similar way that Nigeria is a no-go area as far as Internet trading is concerned.

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