Australia Spending More Time Online with Fewer Companies

Australia is no stranger to oligopolies. Indeed, each of the four pillars of its economic shrine — banking, media, retail and telecommunications — operate in one. New research indicates that the Internet maybe headed down the same path.

Jupiter Media Metrix Monday released data that found half of the total time spent online was done so with just four corporations. Furthermore, 60 percent of time spent online is done with 14 companies. This is in stark contrast to two years ago, when 110 companies competed for 60 percent of users time.

The irrefutable trend is driven by two factors — one obvious and one subtle. The obvious reason is that with a contracting economy and vicious financial markets, the desire for consolidation and mergers and acquisitions increases. Indeed, the AOL Time Warner merger directly affected the first critical statistic, eliminating an entry in the top 11 when the deal was completed.

The sky diving NASDAQ and global technology valuations has also been a prime contributor. Simply, large professional investors only care about large companies. To get back on the radar of these institutions, executives must band together and create conglomerates to keep their line to capital open.

The second and more subtle contributor is the changing nature of competitive barriers. Previously, it was perceived that there were few barriers to entry for online publishers. The barriers that did exist were mainly infrastructure and technology related. Today, with a with a more mature commercial landscape the overwhelmingly barrier is marketing.

Granted, the Internet offers the potential of any business to market itself virally and at a low marginal cost. However, with the current dynamics, the playing field is overwhelmingly weighted in the favour of the online publishing giants. The incremental effort to channel existing users to other services within the network is relatively low. Furthermore, the economies of scale of running individual business units within a large corporation have been continually proven in offline enterprises.

Perhaps there are a few parallels to be drawn in the experiences of Australia. Currently the Internet accounts for a small percentage of global commerce. Likewise, Australia is a relatively small player in world trade and GDP. Locally, Australia has found that there is only room for a few players in each sector — with the Cranbrook catastrophe, One.Tel adding further credence to this theory.

With the Internet at its current stage of growth, perhaps there are a few lessons to be learnt from Australian businesses and their cost structures and investments. The counterargument to this is timing. In 10 years, the Internet will be big enough to support a more diversified economic landscape. In the mean time though, many would do well to look down under in search of the realities of online media.