Monday, October 22, 2007
Arthur Goldstuck: Experience Counts
In the next 12 to 24 months, South African businesses that have been struggling for years to make the internet work for them will be celebrating.
For some unknown reason, which many website owners will put down to their own brilliant strategies, insight and foresight, traffic to their web pages will explode. Customer response to web-based offerings will take off. Customers will be telling them what they would like to see on the web sites. Site owners will finally be able to use the phrases "Internet presence" and "Return on investment" in the same sentence.
While it won't apply across the board, this success story is almost inevitable for websites that have been built with the customer in mind, that are easy to navigate, interesting to browse, and in tune with the expectations of users.
The magic bullet that will make all this possible will be something completely intangible. It is called Experience.
From the analysis of findings from research into apparently unrelated aspects of internet usage in South Africa, a clear conclusion has emerged: there is a powerful relationship between length of time an individual has been on the internet, and that individual's willingness to bank online, shop online, engage in social media and specialised social networks, and generally strive for online self-actualisation.
That last one is not an arbitrary example: it is the same term used for the peak of Abraham Maslow's well-known Hierarchy of Needs. It begins with basic physiological needs, like food and shelter, works its way up through social needs like love and belonging, and peaks with self-actualisation.
The Internet Hierarchy of Needs is almost identical. It starts with physical needs, such as getting connected and quality of that connection, works it way up through social needs like communication and networking, and peaks with self-actualisation, such as user-generated content, interaction with web sites, and leisure shopping.
This evolution up the Internet Hierarchy of Needs does not happen overnight. According to a related phenomenon, called the Experience Curve, it takes at least six years for the average individual's internet usage to develop from a physical Internet connection to online self-actualisation.
Take, for example, the number of onternet users online in South Africa in 2001. It was no less than 2,8 million individuals. Many online retailers saw this as a huge potential target market, and invested tens of millions of rand in reaching that target market. The result was that they made losses running into the tens of millions of rand. The total spent in online retail that year was a mere R162m - in an overall retail market of more than R300bn.
The numbers didn't make sense - until the market was segmented according to experience of users. It emerged that only 200 000 South Africans had been online for six years or more. Segmenting this market further into demographics like age, gender, education, location and income, it became clear that the real audience for a specific online retailer was probably no more than 50 000. No wonder they all took a bath!
Now fast-forward six years. At the end of 2007, 3,85 million South Africans will be online. And those 2,8-million people who had been online at the end of 2001 will all be at the six years-plus level of internet experience.
Even a conservative segmentation of this audience suggests that a major online retailer has a potential audience of close to a million shoppers who were ready and able to shop. Online retail in 2007 is expected to see the sharpest percentage growth since 2003, and the biggest rand growth in the history of the sector in South Africa.
And in 2008? No less than 3-million South Africans will have been online for six years. The number grows to 3,2 -million in 2009. The online market is suddenly real, the online user is suddenly experienced, social media like blogging is taking off, social and business networking sites like Facebook and MyGenius are taking South Africa by storm, and it all appears to have happened overnight.
But, as they say in the entertainment industry, it takes years of sweat and tears to become an overnight success.
Arthur Goldstuck is an award-winning author and journalist, and is managing director of World Wide Worx, which leads research into Internet and mobile communications in South Africa. Visit his urban legends blog at thoselegends.blogspot.com
NVDL: 3 comments.
1) Internet spend is predicted to overtake ALL OTHER MEDIA in the US by 2011. And why not? The internet is now the domain for movies, music, news, music, TV, games - just about everything.
According to 'The Media': Blog, podcast and RSS advertising is seen to reach US$#1.14 billion over the next 5 years - a growth rate of around 71%. Increasingly the online market is looking towards commentators and inviduals - not corporates or puppets - for the sort of information they want online.
2) In South Africa the internet population is still growing larger -think of iBursts sponsorship of the weather and Survivor. Thus there are two basic drivers domestically for growth online: acquisition & experience.
3). I read on Friday - at The Oil Drum.com - that websites that have been writing (advising, warning etc) about energy issues, will crash when energy prices cut loose and world panic sets in. Millions of people are going to want answers and a lot of people, a lot of channels - including world channels - simply won't know what is happening and why.