Tuesday, August 7, 2001

Growth Factors For Internet Recovery Remain Strong

Jupiter Media Metrix, a global leader in Internet and new technology analysis and measurement, today reports that long-term growth factors will continue to drive development of the Internet marketplace, even though current market conditions will temporarily hinder their near-term effects. According to a new Jupiter report, the key long-term drivers—which Jupiter analysts identify as continued consumers' demand for Internet services, more fulfilling online users' experiences, growth in consumers' average online tenure and business cost savings—that initially made the Internet so promising, remain powerful and will become self-reinforcing with the passage of time. Although current market constraints—including reduced financial market liquidity, weakened consumer confidence and reduced capital and marketing expenditures—have slowed growth in some sectors, such as online advertising revenue, business-to-business (B-to-B) trade and B-to-B infrastructure spending, their overall impact is expected to be relatively modest.

"While many Internet businesses today are mired in financial difficulty, it's important for all not to be overwhelmed by the negative hype that is distorting the long-term picture," said David Card, vice president and senior analyst, Jupiter Media Metrix. "There are many hurdles and setbacks to be overcome in the months ahead, but most of these should prove to be short-term setbacks, the magnitude of which will be offset by continued long-term growth factors. This doesn't mean that all of the Internet companies around today will succeed, or that the stock market bubble will revive, or that there's huge potential in niche markets. But, a few serious businesses across many Internet sectors will have large, thriving markets to capture."

Internet Users Undaunted by Market Mayhem
Jupiter analysts have found that consumers are seemingly oblivious to the dot-com shakeout. Media Metrix online traffic data show that the total number of unique visitors grew by over 13 percent throughout the first half of 2001, despite the tremendous negative publicity surrounding the Internet. In addition, secured conversions at retail sites (i.e., the portion of online visitors to retail sites who go into secure mode, a proxy for online buying) are increasing steadily as well. In January 2000, less than one-quarter of visitors to retail sites entered secure mode—a year later, in January 2001, 45 percent of online retail site visitors did so.

Jupiter Forecasts Stay Current
Jupiter has a strong track record of reliability and accuracy in its forecasting and the vast majority of Jupiter's forecasts have proven to be either on target or conservative. The dot-com shakeout and market downturn have not brought major revisions to Jupiter's market forecasts. Short-term setbacks, however, have pushed out original 2005 revenue targets to 2006 or 2007 in some cases. For example, Jupiter analysts now forecast that online retail commerce will total $104 billion in 2005—down just 12 percent from the figure projected last year—largely due to the online grocery meltdown. Furthermore, online-managed business travel is another sector that has been hit by the slowdown in corporate spending, and Jupiter has consequently lowered its 2005 revenue target to $25 billion from the $33 billion originally forecast last year.

"It's easy to be skeptical about the Internet's future at this point, given what's happened in the stock market," said Evan Cohen, vice president of data research for Jupiter Media Metrix. "But people were skeptical five years ago too, just as the Internet was developing as a consumer medium. At that time, Jupiter predicted there would be $5 billion in online ad spending in 2000. Our forecast turned out to be conservative, in actuality, as the majority of our forecasts from the mid-1990s have. Looking toward 2005 is similar—what might look aggressive from today's vantage point is quite realistic in five years' time."