First things first: The Naked Net will now only appear every second Wednesday, as my colleague Calum Russell has kindly offered to write his own eBuzz column every other week. Welcome to ITWeb, Calum. I`m sure that an experienced view on e-commerce will be welcome to most readers, who are - I`m pretty sure - grappling with coming to terms with the same issues that we`re all fighting with: how to transition our businesses successfully into the 21st century and beyond. I will certainly be an avid reader of eBuzz.
The brands are rapidly becoming big, national mammoths with much parity between them.
Lots of news again during the last two weeks from the "front" that is the South African Internet access industry. First and foremost, of course, there is the taking-over by Yebo!net of Global Internet Access' consumer user base. Pegging the value of such a transaction, especially since it appears to involve close co-operation into the future, is very difficult for an outsider, and I won`t try.
Suffice it to say that it is another significant step towards the streamlining of the SA access market. It represents the second last of the "big players" to be amalgamated with a bigger player... from a user base size point of view, there is only ICON (The Internet Solution`s consumer offering) left to be acquired or merged into another entity.
With the increasing commodification of dial-up Internet access, growing a user base of a magnitude that could compete with the M-Webs or Yebo!nets has now become well-nigh impossible in this market. We`re rapidly moving into a state at which sales will be made on brand and not quality or other intrinsics. On top of this, the brands are rapidly becoming big, national mammoths with much parity between them. Judging from the amounts of advertising and marketing funds their owners are dedicating to growing market share and awareness, this will continue a while into the future.
Knowing some of the players in the latest deal, I think the user base vs call centre arrangement between USKO and Vodacom is a good idea and will probably work well. I believe that over time, the big players in the consumer Internet access market will come to the insight that they are primarily brand management and user management entities; network services, technologies and product support are best performed by companies whose primary focus is a technology focus.
What about the smaller players?
I asked this question a few months ago when I was first commenting on merger mania in the Internet industry. Sadly, I believe the picture has just become even bleaker. The hope that selling a small dial-up user base could make good money for smaller players is probably rapidly disappearing. I would imagine that none of the big players would be prepared to consider the relatively high costs and overheads associated with acquiring a small (sub-5 000) user base anymore due to the sheer scale of their operations.
Because of critical mass and marketing momentum, integrating a small user base into a bigger one is actually more expensive than simply "marketing the users across" by enticing them with better pricing, better services and a bigger brand.
People often ask me whether I believe there`s a niche market for smaller Internet access players. The off-the-cuff answer is generally: "Maybe." Which, I know, isn`t very helpful. But the more I think about it, the more apparent it becomes that commodification means "one product for everyone" and "all things to all people". I`m not as sure anymore as I used to be even six months ago that there is a significant market for a focus on providing dial-up and dial-up-related connectivity to the small business sector.
There is a small-scale convergence going on in dial-up access: as connection becomes faster (ISDN, 56k), the need gap that might have once existed in services specifically for small offices is closing. Small offices, I think, will be just as at home with ordinary dial-up Internet access as single users.
Grow the market, don`t fight among yourselves
One parting thought: for a while now, I`ve been meaning to reiterate what I`ve said before in this column. I feel that the SA Internet access industry is perhaps a little too competitive within itself and not competitive enough when it comes to actualising the real potential in this market: growth.
While this may sound puzzling to Internet access marketers out there in the field, I think there`s a core point to think about here. Fundamentally, I believe it`s incredibly important - for the industry and our country - to grow the market as such. Stealing users from other providers is admittedly easier (and, the "older" the user, the easier and cheaper it is to convert them), but we`re neglecting to go out there and sign up all those people who don`t have access yet.
All this tremendous market potential is being ignored in favour of the big brand providers attacking each other for their customers. I think we`d be doing the long-term prospects of the market an immense favour if we started focusing on growing the overall market. In a country with over 40 million people, 500 000 or even 1 million dial-up Internet users are a tiny subset.
We should be putting PCs, modems and Internet starter packs onto the other 39 million peoples' desks.
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