New year of opportunities and online development

Slowly but surely, Website advertising and sponsorship are gaining ground as media but once audiences expand, giving businesses the incentive to go online, commerce could be the real long-term revenue gatherer.

For the past couple of years, the new media sector in the UK has looked to “next year” for the market to take off. But is next year going to be all we have longed for?

That depends. If you bought the early hype about the Web, you will definitely be disappointed. If you live in the real world, where it takes time to build new products and services, let alone a whole new medium, next year will be another year of “getting there”.

The three essential elements in the creation of a new media market – audience, ad spend, and online transactions – will continue to show healthy growth.

In terms of audience, AOL is a good yardstick for growth. Last week, the company an-nounced – a month ahead of its schedule – that it had hit 10 million subscribers worldwide, while in the UK it broke the 250,000-mark over a month ago.

We can expect the home-based consumer market to grow by over 10,000 households a week next year, a figure which two recent reports from NOP and GfK Marketing Services both fixed upon independently. That would put the total size of the audience, by the end of next year, at about 1.5 million households.

That, perhaps, is not many “eyeballs” for advertisers, but don’t forget one of the fundamental laws of networks – their power and usefulness increases with the number of people attached to them.

In essence, that means when nobody has e-mail, there’s not much incentive to get connected. But when everybody has e-mail, there’s a far greater incentive to go online.

Ad and sponsorship revenues will also see dramatic growth next year. This year, most estimates put the value of advertising on UK Websites at about 4m to 6m. People are already talking about a figure of 10m for next year – a figure which would barely register in the TV market. But which other ad market is expected to double every year?

The great unknown is online commerce. In the US, companies like CDNow and Amazon.com have proved the medium’s ability to act as a sales channel. But as yet, nobody really understands what the triggers and barriers to growth in online sales might be in Europe.

One project which will help clarify the matter is the e-Christmas Website, launched this autumn by a consortium spearheaded by Microsoft, Hewlett-Packard and UPS. The report and analysis of the project, being written by KPMG, will make interesting reading when it is delivered to the consortium in mid-January.

For what it’s worth, my feeling is that electronic commerce will prove to be a far bigger generator of revenue in the long term than online advertising – and next year we will see an explosion in sites equipped to offer e-commerce services, which will drive Web commerce in Europe forward. Have a Merry e-Christmas.

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