The numbers game

Every once in a while, I get what I call the "check the numbers syndrome". While not a particularly scientific affliction, this is a bug that bites me every three months or so which tells me to go and check on the Internet`s growth and figures. Of course, everyone has different figures, which is what makes this so much fun. It also makes it confusing.

Generating Web traffic is hard work, and the key to success lies in a complex interplay between all the `traditional` ways of Web as well as providing real quality content to users.

That the Internet has had one of the most remarkable growth rates in the history of any technology (and that includes paper) can`t be called into question. But I do marvel at the figures and how the research houses got to them. And when the numbers bug bites, I can`t help but wonder what, if any, meaning is hidden in these figures.

NUA (http://www.nua.ie), an Internet research consultancy, claims that in July 1998, there were 129.5 million Internet users worldwide. That`s quite a figure, and it seems a little too optimistic, since other research houses, especially in North America, have recorded slower growth rates in the last two months than at any time preceding. Some consultancies peg the real figure closer to 60 million. While these figures - whichever one you choose as the `real` one - are certainly impressive, the question remains: what does this really mean? It`s a good marketing ploy for Internet companies, especially those selling advertising, to be able to go out there saying, "This is the size of the market." Unlike television viewers or radio audiences, however, it`s not as if all 129.5 million people are actually going to be looking at your Web site, is it?

Generating Web traffic is hard work, and the key to success lies in a complex interplay between all the `traditional` ways of Web marketing (eg registering you site on search engines, banner advertising, etc.) as well as providing real quality content to users. Internet usage, in the main, differs fundamentally from other types of media (if indeed you want to accept that the Internet constitutes a media type; personally I feel that it`s more of an environment and not a media type).

The primary differentiating factor is the fact that content viewing on the Internet is entirely voluntary - i.e. the Net relies on "pull" as opposed to the "push" of all other media. While on the radio, you can`t help but hear the commercials, on the Internet there are no guarantees and no captive audiences. This seems blatantly obvious, but you should hear what some people are out there selling. In South Africa, if you get 500 actual quality visits to your Web site, then that`s a lot, never mind the 129,499,500 other Internet users who might also come and take a look.

Common wisdom has it that there are about 800,000 Internet users in South Africa. Based on a set of more or less educated guesses, the assumption is that 400,000 are home or SOHO dial-up users, while another 400,000 use the Internet from work, connected through their corporate LANs and supplied with leased line Internet access by ISPs. I think that this number is probably substantially less (depending on how you define `substantial`, of course), given that a lot of those users will be duplicate home/work users. I know an inordinate number of people who have access both at home and at work. Is it legitimate to count them twice? Surely not, no matter what model of statistical reality you subscribe to.

For argument`s sake, let`s then peg the figure at about 600,000 users, just to be realistic and to accommodate 30% industry growth figures (another common assumption, though not necessarily accurate at all). This is extrapolating from figures published last year by Media Africa (http://www.mediafrica.co.za). That`s substantially less than the 129.5 million quoted internationally. Certainly, some assumptions can be made about the demographics of this market - most of them will be in LSM 7 and 8 (very high income). They share certain values and constitute a relatively homogenous market. Taking into account SA demographics in general, they are mostly white and affluent.

Interestingly they are also a shrinking `universe`, as the brain drain (and capital drain) continues. Breaking into `new` markets isn`t something local ISPs have been very good at so far, citing various reasons, such as the high income gap and the even higher barrier to entry - access to computers, phone infrastructure, etc. So it`s likely that growth in terms of numbers, in SA, has a natural cap. A personal hunch is that individual Internet users will naturally cap out at about 1.5 million users, roughly the same number as the 1.5 million M-Net decoders sold. Apparently, M-Net haven`t been able to substantially increase growth during the past two years or so, and television sets are a much lower barrier to entry than computers.

In terms of e-commerce, the figures are even more confusing. Internationally, it is claimed that about 1 million companies are - in one way or another - doing business on the Internet. I think this guesstimate includes companies with simple marketing Web sites. CyberAtlas (http://www.cyberatlas.com) reports that in 1998, there are roughly 400,000 companies world-wide that are conducting business-to-business commerce using the Internet.

In SA, there are currently just over 19,000 domains registered inside the CO.ZA top-level domain (TLD). That figure excludes other organisations (academic, NGOs, etc.). It also excludes the moderate number of companies that have elected to register a .COM address instead. Since I don`t have entirely accurate figures as to how many of those CO.ZA domains have functional WWW servers registered, I can only guess that there are no more than about 3000 companies in ZA-land that have actually taken the trouble to set up a Web server. Of those, perhaps 10% are serious about conducting commerce on the Net.

While there is a substantial industry in place to cater to the e-commerce-interested business`s every whim, actual success stories so far are limited to a handful. And in comparison to a lot of other industries, the Internet industry is very vocal in comparison to the actual cumulative annual turnover that it generates. I would peg that figure somewhere close to R500 million, perhaps R600 million annually. That includes everything from access provision to infrastructure building and Internet systems integration. There are - to my knowledge - no known figures regarding e-commerce volume in South Africa. I won`t even hazard a guess.

Internationally, the figures are pegged close to US$ 100 million, with a solid estimated growth rate variously pegged at between 50% and 100%. I wonder if we`ll be able to achieve the same sorts of figures locally. I think eventually we will, but it will most likely not be in the field of consumer trading. I think that companies, once they realise the inherent savings of business-to-business trading (supply chain management using online facilities, online sales cycle management), will become smarter in SA, as smart as big corporations are rapidly becoming everywhere in the world.

What will be important to watch and understand - as it happens - is whether there will be new social challenges to go with a "new business elite" of this kind. The plight of ordinary workers in SA isn`t becoming any easier, and introducing newer, less labour-intensive electronic practises might throw open new dimensions of economic disadvantage as well. It is our duty, both in the Internet industry and everywhere in commerce, to address these issues at a macro level before they become problems. Politically, that will be one of the most important challenges for the new South Africa, and most of us aren`t even aware of it.