Internet Slow Down: Who Benefits?

[SOUTH AFRICA] With the dot.bomb news dominating the digital waves over the past
six months, one would think the industry is dead and buried. But has anyone actually
stopped and analyzed the shake out to determine who will benefit from this correction?

Journalists continue to report on the doom and gloom. Just take a look at the
hammering Internet advertising is taking. You would never say that the industry has
experienced 95% growth this year. Not bad when other media are experiencing an
average growth rate of below 6% per annum.

But the question remains, who will benefit?

Look at it this way, for every dot.bomb that takes place another Internet property
benefits from the reduced competition and increase in traffic. Although South Africa
cannot expect the same due to a more conservative approach to Internet
developments- what is happening is a slowdown of new Internet ventures and a
growth in local content and service provision. “Keep ’em local,” I say.

This undoubtedly will benefit the current and more established players, allowing them
to consolidate their position in the marketplace and entrench themselves with current
customer bases. Furthermore the “first to market approach” has given way to a more
manageable growth strategy for Internet properties. Making money is now as
important as spending it.

2001 will bring with it a new breed of Internet properties and companies offering
Internet solutions, e-enablement and connection to the wired world; however, more will
be expected from digital players and service providers. Being wired is just not enough.

Expect to see more on- and offline services centered around business enhancement,
business intelligence and facilities or services that go beyond simply trying to bring
buyer and seller together in a common marketplace. Specialized services that can show
their value in growing a business will be in demand.

Locally, e-mail communication should come to light as the driving force of customer
retention and cost effective promotion. Companies that can enhance the relationship
building process will be well positioned to take advantage of the Internet realization
era.

Internet advertising can expect to undergo changes as players look to enhance the
advertising value of their models and rich media starts to play a role in the local
industry. Offering banner impressions alone will not be enough and pay-per-action and
ROI will drive players to re-evaluate there advertising offerings.

M-Web’s approach -although not profitable to date- puts them in a strong position to
dominate in the future. They certainly have the eyeballs, financial backing and ability
to attract the right partners and clients. Johnnic’s push has also been bold and with
key acquisitions and partnerships one expects them to continue their drive in 2001.

The B2B markets are still very much wide open, with players still struggling to come to
terms with the right model. This is a marketplace where, perhaps, there will not be one
or two dominant players but a broad cross-section of online services each offering
their own unique or specialized B2B facility. Internet specialist will look to drive
outsourcing as a viable and cost effective alternative, however being able to deliver on
expectations will be critical for survival.

The wireless market should be high profile news in 2001. But players should be careful
n

ot to get involved prematurely. Internationally, the thinking is that there is no defined
winning model for wireless and that this industry is going to take 2-3 years to develop.
A bumpy ride is expected as players define their role in this market place. Will wireless
connectivity suppliers take on the role of banker as transactions make the wireless
leap, and will consumers tolerate wireless advertising at their expense? Wireless
Internet is not the same as static Internet and wireless will go through an evolutionary
process.

Alliance building, acquisitions and the carving out of market share will still be prime
objectives for many players. I do however believe that the South Africa market will see
itself move closer to consolidation and even be threatened by monopolization as we
approach the end of 2001.

More dot.bombs are expected next year, but keep your eye on the potential benefits
and opportunities of current market conditions and don’t expect a sudden revival of the
Internet boom.

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