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Marketing in the Internet - as seen from Italy

by Giancarlo Livraghi

No. 27 - October 9, 1998

  1. Editorial: Markets to be invented
  2. Italy: the trend is unclear
  3. Two maps
  4. Is poor net culture good for business?
  5. An interesting opinion

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1. Editorial: Markets to be invented
This issue of NetMarketing is short, because its author has been "on the road", and now is on his way to the United States – where he hopes to find a few more insights or points for discussion.

Two facts, in the meantime, are becoming more and more obvious. The first is that there is a vast gap between imagination and reality in electronic business; and it’s not narrowing. The implications can be quite complex, but in my opinion one thing is clear. Imagining markets that aren’t there can be quite disappointing, if not dangerous. Inventing new markets, on the other hand, can be quite rewarding – though it takes hard work, patience, consistency and dedication.

The other observation is that "business to business", which many people (including me) thought would flourish online before any consumer market, doesn’t seem to be surfacing as strongly as we expected. But in this, as in many other things, it could pay to look beyond the surface. Some substantial activity in electronic transactions may be developing in ways that are not immediately visible to superficial observation.

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2. Italy: the trend is unclear
It may seem a waste of time (and in a sense it is) to check the trend every month; the time is too short to be significant. But there were signs of a new trend this year and I think it’s important to keep track; to see if it stabilizes into a new pattern or is just another temporary adjustment.

Unfortunately September data, published by RIPE on October 6, don’t confirm the trend in prior months. The July-August growth appears to be a temporary adjustment; Italian hostcount is now below the July figure – as shown in this graph

Internet hosts in Italy and Europe

from September 1997 al September 1998
August 1997 = 100

Analysis on data by RIPE Réseaux IP Européens

Internet hostsin Italy and Europe

While large numbers (as, in this case, the total for the Europe-Mediterranean area) show a fairly consistent trend, there are sharper ups-and-downs in the figures for individual countries, which aren’t always relevant in the short period; only extended trends are really meaningful.

The situation is clear also if we look at an update of the graph that appeared in this newsletter two months ago:

Internet hosts in five European countries - 1995-1998

Source: RIPE (Réseaux IP Européens) – quarterly data – numbers in thousands

Internet hosts in five European countries - 1995 - 1998

Note: in the case of France, the minitel factor is not considered in this graph.

A trend, that we had seen in the past and appeared to be changing, seems to be taking hold again: the gap between the two more advanced countries and the other three is widening.

The picture is somewhat unclear. We shall need to follow the trend in coming months to see how it evolves.


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3. Two maps
The situation worldwide and in Europe, well known to the readers of this newsletter, is even more obvious in these two maps.

Internet density worldwide

Hosts per 1000 inhabitants – analysis on data by Network Wizards, August 11, 1998


Internet density worldwide

For an analysis of the worldwide picture see point 2 of the August 16 issue.


Internet density in Europe

Hosts per 1000 inhabitants – analysis on data by RIPE Réseaux IP Européens, October 6, 1998


Internet density in Europe

For details of the situation in Europe see point 3 of the August 16 issue.

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4. Is poor net culture good for business?
The media storm that blew up in September is over, but the trickle of bad reporting about the net continues. It’s beginning to be understood that if this is no good for culture and society it’s not good for business, either; and it can lead to all sorts of bad ruling and legislation. And of course a lot of the hype about miracle technologies or over-emphasized projections is almost as harmful as negative reporting. The problem is quite serious and needs consistent corrective and pre-emptive action. (See Homer’s daughter and market freedom.). There are a few organizations around the world concerned with these problems – such as ALCEI in Italy – and I think they deserve to be supported.

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5. An interesting opinion
In the September issue of an Italian magazine, Media Key (a special report on new media and electronic communication) there was an interview with Vint Cerf – one of the masterminds of ARPAnet, from which the internet originated. I think his opinions are very interesting; here is a large part of his comments.


Q. At the dawn of the millennium, we are moving gradually from an industrial society to one of computers and telematics, and the internet is the main cause of this change. What influence will this revolution have on people?

A. Quite simply, the internet will profoundly change everything it touches – radically transforming the way we live, work and play.

However, it’s worth recalling that the changes the internet is making have been a long time coming. First of all, it has taken nearly 30 years and the careers of countless individuals to bring us to where we are today. 30 years since the founding of the ARPANET; 25 years since the introduction of TCP/IP; and finally, we’re almost 20 years to the introduction of the personal computer – another vital link in the development of the information society.

In addition, we’ve seen the changes wrought by the internet acted out before. And in fact, by some measures, the scale of change was far more dramatic when the telegraph was introduced in the 19th century. This is the story that noted author Dava Sobel tells in her upcoming book, "The Victorian Internet." In very short order, we went from a world where messages could take weeks or months to reach their destination, to near instantaneous transfer. Coupled with the introduction of the railroad (whose right of way ironically also carried telegraph lines and today, optical fibers), the effect on commerce, culture and industry was notable.


Q. In your opinion how will the development of the internet and the liberalization of communications affect today’s society? In the electronic community computers will connect individuals, freeing States, the communities will be transversal, etc.

A. From the internet’s earliest days, we’ve seen incredibly vibrant communities of interest take root and flourish. We’re going to see that continue in much the way that Michael Dertouzos of MIT has predicted in his fascinating book, "What Will Be."

This is all for the good. In a videotaped address I prepared a few weeks ago for an audience in Central Europe, one of the most important factors for a culture’s continued growth and vibrancy is unfettered contact with ideas and peoples from around the world. It isn’t any accident that the great cities of antiquity like Athens, Rome and Alexandria developed along ancient trade routes, eventually becoming crossroads of both knowledge and commerce.

However, while some may predict the eventual withering away of international borders, I take a more circumspect position. For while we may interact in a cyberworld of blurring and disappearing borders, we still have to live in a physical world with governments and laws that we will need to abide by. Governments that will not go away anytime soon, nor is it clear we should want them to, speaking generally. The internet is not a substitute for all the things that governments undertake on behalf of citizens.


Q. Will the internet continue having infinite free space in the communications network or will it be controlled by a small group of the multimedia predators? Or by governments?

A. Today, in the early stages of its development, the Internet has already reached too many people, is too vast, and carries too much information for any one person, company or entity to exercise complete control over the entire network. This is not to say, however, that actors like multinational corporations or governments can’t have a strong, if local, influence on the internet.

In the case of corporations, I worry that some software and hardware companies may try to manipulate the standards setting process to their own economic benefit. One of the greatest aspects of the internet is its enabling of cross-platform connectivity – something we need to see more of, not less. In addition, I fear that many governments may look at the internet as a potential revenue windfall, and may limit its utility by burdening it unduly with onerous tax policies. Not everyone shares that view.


Q. What kind of risks will the multimedia globalization cause?

A. None that we haven’t already seen. Earlier this year, it was common to see articles in the mainstream press bemoaning the increased risk of fraud among practitioners of journalism on the internet.

It wasn’t long thereafter; however, that we saw just how vulnerable traditional journalism was to fraud as well. In particular, I refer to the New Republic/Stephen Glass situation; the Time/CNN joint production on American covert operations during the Vietnam War; and finally the agonies at the Boston Globe amongst many of their most prominent columnists.

Despite the recent troubles of mainstream journalism, we still need to take special care when viewing information on the internet. It is clear that while we are perusing internet content, we need to act as our own editors.

Don’t believe everything you read, see or hear on the internet (or any other mass medium for that matter). Be constructively skeptical, and be sure to check facts and confirm sources. If we fail in this effort to "regulate" the internet for ourselves, it is likely government authorities around the world will attempt to do it for us using new laws and regulations – a sort of blunt-force object designed to bring the Internet to heel.

This would be an unwelcome development, as legislators with legitimate fears, but without first-hand expertise of the Internet, may design regulatory structures and laws that may retard the use of the Internet, and slow the proliferation of new services and, in the worst case, completely destroy its promise as a flexible new, global medium of communication.


Q. What influence has Internet had on marketing, production and sale of goods and services, and what kind of influence will it have in the future?

A. It seems as it, after a few years of fits and starts, electronic commerce is coming into its own. (In the US... - g.l.). Just recently, a study conducted by Nielsen Media Research and Commerce Net seemed to suggest that users are getting more comfortable with shopping on the web. Certainly, much of the initial reluctance had to do with the relative youth of the medium as a platform for commerce, and users, even early adopters, just had to get used to the idea.

Moreover, as people have begun to realize that secure transactions are possible on the internet, they have become much more comfortable with using their credit cards over the web. Finally, it was just a matter of time before a greater number of merchants embraced the web as well, so that today, there is a far greater number of products available on the web even compared to a year ago.

I expect the next development in electronic commerce in the consumer space will concern the rise of intelligent agents. The web can still be a confusing place, and comparison-shopping is probably the next big step in increasing the web’s utility to consumers. One great example is Wireless Dimension  – a site that allows users to comparison shop for the best cellular phone deal in their geographic area. After answering a few simple questions about what sort of features you want, the site automatically pairs the plans best suited for you, and allows you to compare them side by side.

The acknowledged leader in electronic commerce,, seems to have recognized this as well. Only a few weeks ago they purchased Junglee, a web-based comparison shopping service. Look for more developments in this area over the next few months. In fact, I think there’s an MBA project waiting to be undertaken predicting what long-term effect intelligent agents will have on pricing.

But even with the great strides that have been made in consumer use of the internet, the real tidal wave in electronic commerce will be in large-scale corporate transactions. I expect developments here, while having a longer and slower growth curve, will eventually have a far greater impact on the world’s economy. Once industrial giants like General Motors, Mitsubishi begin to link with their vendors and suppliers over the Internet, look for electronic commerce to really take off.


Q. What do you think about the internet being considered as a big breakthrough for the underdeveloped countries to reduce their gap?

My current boss here at MCI, Fred Briggs, our chief engineer, likes to note that for 50 percent of the world’s population, dial tone is still an enhanced service. Despite this, I think the developing world does have a unique opportunity to travel ahead with the rest of the world in terms of telecom infrastructure.

Here in the developed world, we are continuing to see incredible growth rates in terms of data traffic, while voice is growing at a much slower pace. When we look at the future, it is increasingly clear that we will need to deploy a network that is configured to carry mostly data, with voice riding along as an afterthought. Unfortunately, we have a network today that is configured for exactly the opposite purpose – although that is changing rapidly.

In the developing world, this problem doesn’t exist. What infrastructure is deployed is antiquated anyway, and can be rapidly replaced with new equipment. In fact, many African countries are already taking advantage of this by deploying advanced wireless networks.

But more than new telecom equipment and investment is going to be needed for developing economies to flourish in the information age. Today, the telecom sector is most developing nations is dominated by the government PTT – a situation that needs to change if a country expects to attract the level of investment needed to upgrade their domestic telecom network. The fact is, neither network development nor economic growth will flourish in nations that do not deregulate telecommunications.





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