C. Future Developments 1997 2003



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1) e.g. print, video
B. Spain




N*

Over
20%


Over
15%- 20%


Over
8%- 15%


Over
0%- 8%


0%

CD-ROM

26

11.5

11.5

19.2

26.9

30.8

DVD-ROM


24

37.5

16.7

25.0

20.8

-

Some national institutes held the opinion that the classification offered were incomplete because hybrid products (allowing the change from offline to online and backwards in the search process) were not mentioned. For example, the UK report commented:



"Hybrid products may be very important as they can offer type of computing experience which many web site are unable to capture due to bandwidth constraint."

Central results of the quantitative and qualitative estimations were:



  • The experts were nearly unanimous in their opinion that diskettes will suffer absolute decreases in revenues in coming years. Taking into account their already low market share they will soon be finished - at least in comparison with the other offline submarkets.

  • Print and other offline formats outside of CD-ROM and DVD-ROM may fare better than diskettes but they will also very clearly lose market share in comparison with CD-ROM and DVD-ROM.

  • When the data for the MSSTUDY II were collected DVD-ROM was less a real development than an expectation though some titles did already exist mainly in the consumer area. But the experts were very sure that this would rapidly change in favour of DVD.

  • On the other hand, CD-ROM will not be totally substituted by DVD-ROM, at least not until 2003. While DVD-ROM may have the highest growth rate by far CD-ROM will stay stronger – at least for some years to come – in terms of absolute revenues and market share.

Though relatively decreasing, offline will co-exist with online, and CD-ROM will co-exist with DVD-ROM. The experts repeated frequently their opinion that online will grow stronger than offline. Drastic scenarios like "offline is out" did exist but they were relatively seldom. More frequently was the comment that there would be a further co-existence between online and offline media – the latter especially for big volumes of retrospective data.

When the experts commented the different developments of the offline market they took most often the perspective of CD-ROM and the reason they gave underlined a positive future for CD-ROM at least until 2003.



  • The substitution of print, diskettes and other offline formats outside of DVD will continue in favour of CD-ROM.

  • From year to year production costs and prices will decrease – for technical and economic (high subscription numbers) reasons.

  • More updates and other quality increases will become standard.

  • Faster running CD-ROM drives will be introduced.

  • There is still a lack of standardisation in the case of DVD-ROM.

  • There is a need of high storage capacities in the case of DVD-ROM in the area of consumer products (movies, games) but this is not true for the professional area.

But, of course, in terms of growth rates DVD will reign supreme, as the national report for Luxembourg emphasised:

"Not surprisingly, DVD-ROM was the single most highly rated media in terms of growth potential, and most respondents estimated growth rates of more than 20% p.a. It was generally considered that DVD-ROM was becoming the new standard in substitution of the CD-ROM.



Key factors for the development of storage media were mentioned:

- capacity

- price

- access speed

- ease of use

- standardisation (network externalities)."

A summary coming probably near a general consensus was put forward by the Italian report:



"In the offline part, estimations differ concerning the question of whether CD-ROM still has an increasing role to play, or if it will be substituted by DVD rather. DVD is coming less quickly than it was expected initially. This can probably be referred to the installed CD-ROM drives, which are not yet depreciated. As standard PC-equipment includes DVD only since 1999, significant DVD growth will start at the earliest from 2001 on. Even then CD-ROM will remain in use for a while, as a lot of products do not need more than ½ Gigabyte capacity. The obsolescence of diskettes as a support for electronic information is confirmed."

IV. Generating New Income Streams by Price Policy and by Moving into New Business Areas (Advertising, E-Com-merce, Further Opportunities)

The opportunities to generate new income streams. What are the possibilities for an information provider to increase his revenues and his profitability respective to generate new income streams? He can change his price policy, e.g. his price structure. He may move into new business areas. He can improve the quality of his products.

In the following general problems and trends of "financing EIS provision" will be discussed from the Austrian point of view. Questions of price policy and the relative importance of different income streams were not proposed by the questionnaire so the UK point of view will be taken. See also the Belgian case study about the possibilities of financing Internet start-ups.



In the subsequent parts of chapter IV a more European-wide view can be taken, because in the proposed questionnaire questions about online advertising, E-Commerce and further new business areas were suggested. Questions of product development and quality improvement will be discussed in chapter V.

IV.1 The Austrian Point of View

Trends in financing EIS provision. "The financing of the production of information services is a difficult matter for two reasons. First, information as such has special economic features. It is very context specific, and furthermore, any information about the information already is part of it and difficult to sell once it is distributed.1 Second, the production of information services has a very specific cost structure, involving high fix costs which are sunk most of the time, and very low costs of reproduction. In the Internet economcy, the costs of reproduction even get down to zero. As a consequence, competitive markets tend to collapse (at least in theory), as marginal cost pricing can not cover production costs. Furthermore, the digitisation of content for the first time allows perfect copies, which raises problems of copyright protection. The closer substitutes of the demanded service are, the more the willingness to pay for the original service decreases. These features in mind, it is not surprising that by now, most of the services offered on the Internet are for free. Their production has to be financed indirectly, for instance by cross-subsidising from other activities – this holds for most of the information offered on companies homepages, which is financed like any marketing activity. Another possibility is financing through advertisement, requiring a large and/or specific and well known customer base. Finally, direct investment becomes an increasing factor in financing risky Internet activities.

Costs of production. The ongoing cost-reduction on the level of processing and distribution of content is confronted by constant costs on the level of content production. Small content providers therefore have to get quicker and more specific in their offerings, so that they can stand their ground in niches. It is necessary to join the jump on portal sites, i.e., with the provision of telephone directories at the entry site of important service providers like Yahoo! or AOL. Important marketing budgets are decisive.

The financing of Electronic Information Services is still perceived as a moving target. It is difficult to capture business services statistically. They increasingly make their own and independent part in the production value chain, not limited any more to the role of supplier for the second sector. This tendency describes one feature of the change towards a knowledge based society.

Willingness to pay. Certainly, insufficient willingness to pay for Electronic Information Services is inhibiting the offer of a range of high-quality services on the net. In fact, the difficulty in evaluating information services also holds true for office-services and even for direct face-to-face consulting. Different problems can be distinguished:

  • It is uncomfortable to pay. Online-time is 'already' charged by the network provider and by the Internet-access provider, customers and first of all private customers expect not to be charged further. If this would be the case, it is still too unpractical to be charged by each provider separately. A sort of one-stop-shopping accounting would increase service quality and probably the willingness to pay. For the moment, the only common way of payment is with credit cards, but here, small amounts are not accepted. A European wide standard for smart-cards systems and the introduction of the Euro will probably enhance E-Commerce as well as the habit of paying for electronic information.

- This market has to be educated. There is a need for a definition of special interest groups and marketing. In both these aspects, American players are far stronger. The marketing budget of AOL in Europe for example is bigger than the budget of all small providers together.

- Precise information about the information is required. Customers still feel lost in the information overflow offered on the Internet. One way of increasing the willingness to pay for EIS would be to come up with product information, as a complement to Electronic Commerce. Potential markets can be found in the area of news, weather forecast and reservation, which can be partly used as appetisers. The challenge is to provide most exact and up-to-date information, such a quality increase will bring the willingness to pay with it.

Online advertising. As has been stated above, online advertising will become a source of profit for information providers on the net. Advertisement tariffs are calculated in respect to customer reach and customer focus. Contrary to traditional media, the Internet permits some kind of point-to-point communications, increasing knowledge about customers and as a consequence, increasing potential profit from advertising. This certainly becomes an advantage for big access providers like AOL, and even big information service companies like Reuters, but the question is once more, if small providers will be able to profit from this opportunity. Among the experts interviewed for this survey, about half agreed that providers of Electronic Information Services will earn at least 20% of total income with electronic advertising in 2003. More sceptic interviewees criticised the interfering factor of 'advertising information'. They pointed to the fact that the core business remains the production and distribution of specialised business information. Some saw the moderating factor in the advertising companies themselves, who were reluctant to admit the advantages of Internet advertising. One important future factor of income will come out of electronic transactions (E-Commerce): there was unanimity about the fact that such activities will contribute at least up to 5% of income, and many thought, it will be more.

The Euro and direct investment. The introduction of the Euro will improve financing conditions, as direct investment will give way relative to credit financing, which is dominating now. This is especially precious for companies with high 'intangible assets' like Internet providers. Such companies have a market value far above their turnover. Up to now, Europe is missing appropriate framework conditions. The introduction of the Euro as well as technical improvements may help to install them."

IV.2 The British Point of View

Price policy and the relative importance of different income streams. "How do you expect to be paying for Electronic Information Services in the future (subscription, pay-as-you-go, advertising, sponsorship)?

  • Niche information services are more likely to be pay-as-you-go.

  • Mainstream services may charge a flat subscription rate.

  • Advertising will be important as it enables information providers to deliver the data to users with no up-front costs.

  • In corporate environments, subscription fees were thought to be the safest method of revenue generation from an information service.

  • Flexibility of choice of payment methods would be very popular in a business environment, and may serve to expand the information market.

  • New media will develop pricing models similar to those employed by the software industry (for example, paying for user licences).

Revenue streams. How important will the following sources of revenue generation be to providers of business and consumer information services respectively? Electronic advertising - Sponsorship - Electronic commerce - Fees for facilitating the sale of another company's products or goods - Subscriptions - ISP services in addition to information delivery - Other

  • New revenue streams can be accessed through forming new partnerships and delivering content through community environments.

  • Information providers are still experimenting with new business models.

  • The Internet is often used as a new marketing tool rather than a route to market in its own right.

  • Advertising revenue from the Internet will be very important although as the number of pages on the Internet grows there may be an oversupply of inventory for advertising.

  • Community based solutions will attract both advertising and sponsorship due to their niche audiences.

  • Internet E-Commerce activities will focus initially around high volume low price goods, as the issues of digital signatures and security will need to be developed further before other large scale transactions can start to take place.

  • Subscription charges will play a significant role, and there may be an argument for using a nominal charge on a Web site to deter casual visitors who may slow down the delivery of the service."

IV.3 Online Advertising

An expansion into the advertisement area with reservations. In the proposed questionnaire the experts were confronted with the following hypothesis: "Providers of electronic information services will earn 20% and more of their revenues with advertisement in 2003."

In the cases of Germany and Spain the distribution of answers was as follows:


Table 8

Will the EIS Providers Earn 20% and More of Their Revenues With Advertisements in 2003?

In %






Germany

Spain

Yes, absolutely true

31,8

37,9

No


9,1

20,7

According to these results many experts saw a future of advertising in the area of professional information but also some limits.

Different opportunities of advertising in the professional and consumer area – what is desirable? While the experts were nearly unanimous in their opinion that advertising will have a great future in the area of consumer EIS and many of the cost-free information offerings on the Internet are already financed primarily by advertising many experts saw rather principal differences between the professional and the consumer markets, and the probable development of advertising in the professional market was seen much more sceptically. The typical two reasons given in this context were:

  • Up to the present experiments with advertisement in the professional area are not very successful.

  • Business people and information professionals do not accept advertisement while at work, and their principal reasoning runs as follows: if the user pays high prices for information, has he not the right to be not disturbed?

A typical comment "in the middle" was: If a professional is not prepared to pay much money for valuable data, he has to "suffer" advertisement.

Another question which was important to some experts was: What is desirable? Here some respondents held the opinion that the rise of advertisement may be inevitable also in the professional area. But this may lead to a rise in the influence of the advertising agencies, a decrease in the influence of the information professional and to a decrease of quality in the offered information.



IV.4 E-Commerce

Participation in electronic trade is desirable. But how can it be accomplished? A further question which the proposed questionnaire suggested runs as follows: "Providers of electronic information services will on the average earn 5% and more of their revenues with electronic transactions in 2003."

The distribution of answers in the cases of Germany and Spain are given in table 8.



Table 9

Will the EIS Providers Earn 5% and More of Their Revenues With Electronic Transactions in 2003?

In %






Germany

Spain

Yes, absolutely true

68,4

78,6

No


10,5

7,1

According to these results the information providers saw a business opportunity in E-Commerce though the different results for the area of advertising and E-Commerce may be mainly explained by the different phrasing ("Will the EIS providers earn 20% and more of their revenues with advertisement in 2003?" "Will the EIS providers earn 5% and more of their revenues with electronic transactions?").

Some experts did not give at all qualitative comments for the area of E-Commerce. The other experts typically concentrated on the well-known problems of data security and payment (including the problem of micro-payment). Some experts spoke of the strong position of competitors (e.g. banks, network providers) if an information provider would engage in electronic trade. Relatively seldomly the respondents touched the area of "what to do" and "how to do" of an engagement of an information provider in E-Commerce. This is compatible with the fact that success stories of information providers engaging in the area of E-Commerce are rare. One may even ask whether some information providers did still not acquire the basic skills in E-Commerce or did not search for the right partners in this area and whether some of them will miss the strategic opportunity of an engagement in E-Commerce totally.

Nevertheless, the strategic opportunity exists. Every electronic transaction has to be accompanied by information streams and some of the information which has to be exchanged belongs to the core competence of the information providers. For example, in the global and abstract world of world-wide electronic trade business partners may typically not know each other and may be able to assess each other only when it is already too late. Therefore a check of creditworthiness by a credit information provider should be done before a co-operation gets started.

As the print example shows, the opportunities of information providers may be even bigger in the area of advertising (adverts selling that in the neighbourhood of valuable contents). But even there the competitive advantage of the information provider is not so strong that it is not possible for him to start too late.



IV.5 The Most Promising Business Opportunities in Coming Years

A great variety of possibilities. According to the suggested questionnaires the experts were confronted with the following thesis: "Providers of electronic information services and intermediaries (information brokers) will make more money by refining, analysing and repackaging information products than by delivering raw data in coming years. Give examples for the refining of information products which are commercially promising during the coming years."

There was a broad consensus among the experts that this hypothesis was true. In the case of Spain for example, the distribution of answers was as follows:






in %

Yes

85.2

Maybe

11.1

No

3.7

Additionally, the respondents saw no problem in defining most promising business opportunities, and in doing so, they produced a great variety of possibilities, a good part of them very concrete. Indeed, it is the sense of good business ideas to be very concrete. Therefore we abstain in the following from abstracting the results very much and give instead some examples from the national reports. Additionally, for everyone who is interested in new business opportunities a reading of the respective parts of the national reports are recommended.

A systematic enquiry in the area of service development was given by the Austrian report:



"The Internet was privatised in 1995, since then an endless development of new services or new service qualities have been developed. In order to sketch some probable directions of service development of information services, interviewees were asked to name some examples of refining of information products:

- The most important service to develop further is the deepening of research through precise linking. As has been said, the very specific feature of information as such, is that it is entirely context-specific. Research service along subjects and industries offering the highest possible relevance for the specific customer are in development. Intelligent search engines, and automatic connection of different databases as well as filters of information from different databases all serve this goal.

- There is a need for highly structured work with data in order to downsize in all media-formats.

- Internet companies still have to learn how to analyse their knowledge about customers. Huge databases are already accumulated and wait for statistical evaluation. The use of them will support push technologies and as a consequence will be of utility for information-seekers.

- Electronic press surveys, electronic press archives.

- Multimedia-interconnection.

- Investor-friendly preparation of financial data. In the future, a responsible investor will not exclusively rely on his financial advisor.

- The connection of external and internal company information and knowledge sources.

- Transaction services.

- Finally services like weather forecast, product development and commented information about cultural programmes which are already offered at the Internet, but still have much space to improve in interconnecting with other offerings and following person-specific search criteria."

In the case of Germany especially the following areas seemed to be most interesting for expansion:



  • "Structuring information, new functions, translation;

  • finding, connecting, integrating;

  • presentation, condensation, evaluation;

  • finding complete solutions in enterprises;

  • electronic marketplaces;

  • financial information;

  • company, market and country reports;

  • news, clipping services;

  • patent information."

In the Italian report the "creation and targeting of communities of interest" was emphasised being



"at the same time a big challenge as a relevant opportunity for all the suppliers, as involving customers in such communities enhance loyalty and exchange of information which can be exploited for business benefit.

To achieve market share recommendations for the suppliers are:

  • flexible tariffs (flat, per transactions, according to customers' needs);

  • better distribution systems;

  • improved and customized content;

  • extended offering from products to related services;

  • service bundles of content and communication."

The national report for Luxembourg pointed to the importance of customization (p. 64):

  • "the customisable user pages of most portals ("My Yahoo", "My Netscape", "My Excite", "msn" etc.) letting users define how they want their home-page designed, which kind of news – general, political, economical, sports, personal interests... – they want to load automatically with the page;

  • customisable stock price-lists of mutual funds assessment pages, enabling users to manage their investment portfolio on the Internet with prices continuously updated with only a twenty-minute time-lag and other, sometimes very sophisticated services;

  • highly customisable business services like the previously mentioned "Technology Watch" approach, where the firm's information system is set up in such a way that it automatically may retrieve and distribute the information most valuable for the business;

  • databases for particular uses, like second-hand automobiles, real estate markets or hotel reservation systems covering whole cities."

Further examples for the "refining of information products which are commercially promising during the coming years" were given by the Spanish report (p. 32 f.):

"Printed media:

  • selective dissemination of information (specific interest profiles);

  • press dossiers;

  • news with links to the cited companies and organisations;

  • news with links as encyclopaedias to expand concepts;

  • flexible services similar to MyNews (this Spanish company was mentioned by various experts);

  • analysed and commented news, with the main data underlined.

Suggestions of other experts:

  • to offer adapted or shortened text together with the full text of law and regulations (documentary consolidations);

  • interpretations;

  • law comments and abstracts;

  • case law analysis;

  • specialised juridical information.

Information for companies:

  • international contacts for possible joint projects, representations, etc.:

  • lists of manufacturers of a specific equipment;

  • lists of manufacturers of components or parts;

  • prices of the competitors in a given sector;

  • analysis of competitors (competitive intelligence);

  • analysis of manufacturing standards;

  • analysis of sales, exports, etc.;

  • study of distributors both in Spain and in other countries;

  • crossdata of the Registro Mercantil (Companies Register);

  • sectoral studies (multi-client or not) national and international (i.e., petrochemical, finance), marketing trends, needs and/or emergence of new products, business opportunities, risk analysis, etc.;

  • portals and webs specialised by topics or areas of activity;

  • exploitation of patent documents;

  • to take profit of the available statistics and economic conjuncture to carry out market analysis;

  • information specially made for managers, delivered simply through the telephone (and fax);

  • information from call centers (centers specialised in carrying out telephone interviews);

  • knowledge management systems for SMEs, associated to self-learning about sales (training about products offered) and knowledge of market shares;

  • information integral management services that can be outsourced by SMEs.

Other:

  • articles condensed and evaluated (or extensive abstracts of them), extracting the main data;

  • scientific bibliographies commented by specialists (states of the art);

  • events transcription;

  • to add value to bibliographic and catalographic records, evaluating the works, compiling or linking revised abstracts and descriptions, establishing relations with other translations of the same document...;

  • electronic journals designed as information products, being possible to search for the summaries and to acquire only the desired articles;

  • public administrations should give out all their information updated and integrated in a unique system to the citizens; these should have to be able to carry out any procedure and, if necessary, to pay the taxes through the network;

  • travel agents and offices of electronic buying-selling, real estate, auctions, etc.; the client could receive information about all the available offers with added value up until now not very much usual as, i.e., multimedia presentation of the products, services, places, etc."

Further examples of business opportunities from other national reports could be added. This leads to the following hypothesis: the information providers and information brokers are in an enviable position. At least, they have many opportunities for expansion. Whatever problem may arise in their "neighbourhood" they can move in and act as a sort of stop-gap. If they do not have the necessary knowledge and know-how they can acquire it.

Additional interesting results are:


  • The experts saw no clear borderline between independent brokers and information centers in companies. Indeed, in the last years the I&D departments at least in the private sector have been encouraged to expand into "internal markets" and, in some cases, into "external markets" with new activities.

  • Typically the experts were very interested especially in the question discussed here. This corresponds with the experiences the Institute for Information Economy and Infratest Burke had with workshops in Germany focussing on this theme. The discussion about new business opportunities should therefore continue and perhaps be transferred to other countries.

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