timone NetMarketing
disponibile anche in italiano

Marketing in the internet – as seen from Italy

No. 71 – June 18, 2004

Other articles on similar subjects
are published in English
in the monthly Offline column


loghino.gif (1071 byte) 1. E-commerce fact and myth

For ten years, almost every year, we’ve been hearing and reading about the “takeoff” of electronic commerce. Piles of books, articles, reports, online and in print. Countless conferences, seminars, university teaching, etcetera. Lots of hype, very rare accurate reporting of facts.

All of the projections and forecasts were wrong, in one way or another. There were two basic mistakes in the concept of an imaginary “new economy”. One is that anything relating to information technology or online activity would happen in a separate time frame – much faster than anything else. That is just nonsense. The other is that new solutions in sales and distribution would, or could, replace the existing systems. That may be happening in a few cases, but not as widely (or as soon) as it was expected.

But there are developments – and they aren’t small. For several years The Economist has been wisely skeptical about e-xaggeration. On May 15, 2004 it published a front-page story titled E-commerce takes off.


This extensive report is based mostly on the US market – that is different from others for several reasons. One is, obviously, size. Another is that mail order buying was widely established long before there were computers or electronic networks. More recently, twentyfive years ago, there were online commercial services (that was eighteen years before use of the internet became a widespread habit in American households.)  Of course there are e-commerce opportunities, and facts, in Europe and in other parts of the world. But it’s unwise to believe that they always happen in the same way (and in the same time frame) as in the American market.

In 1999, at the peak of the stock exchange “bubble”, there were grossly exaggerated projections about the potential of e-commerce. In 2000 and following years, with the bubble deflation and many “dot com” collapses, there were equally exaggerated perceptions of total failure. Of course there were successful online businesses before the bubble, and they are still there – including “classics” such as the Amazon bookstore and Dell computers.

And, of course, there are (relatively) new developments. According to the Economist report transactions on E-Bay in 2003 were worth 14 billion dollars. The single largest category, by amount of money, was second-hand cars.

(There are other developments in the car business. Online bookings for rentals are increasing, while people use websites to collect information before they go to a dealer to buy a new car).

It’s no surprise that travel is one of the fastest growing areas in online business. This is not only because people and companies find it convenient to compare and book directly, but also because airlines like the idea of bypassing travel agents and saving the cost. There also relevant increases in the online booking of hotels, organized holidays, etcetera.

In retail many Americans are doing online what their grandparents did by mail-order (or phone). But “brick and mortar” dealers aren’t losing business. Online retail sales in the United States rose to 5.5 billion dollars in 2003. That’s a large figure, but it’s only 1.6 percent of total retail. Also in the case of books Amazon’s success isn’t threatening the survival of neighborhood bookstores or large distributors.

In other areas, however, traditional shops are losing ground. In addition to travel agents, there is also the case of music.

Of course (for all sorts of goods and services, not only cars) there is widespread “window shopping” online. It’s probably an exaggeration to say that half the people in Europe who have an internet connection use it to check before they go out to buy, but it’s a fact that the influence of information on purchase decisions is much larger than direct online sales.

It has always been difficult to measure the actual volume of business-to-business online transactions. It’s pretty large, but in some areas it isn’t growing. For instance The Economist reports that several companies are disappointed with the results of automated purchasing systems and are going back to cooperation with experienced and trusted partners. However there are cases where suppliers are forced to go through the buyer’s standardized online procedures. In the case of WalMart this involves purchases worth 250 billion dollars.

It’s large, complex and changing picture. But it’s clear that e-commerce exists – and it’s growing.

It’s surprising, however, that one of the most reliable magazines in the word made, this time, a mistake. It isn’t in the report. It’s in the headline. There is no “takeoff”, no abrupt change from rolling on a runway to flying. In spite of the hype and the disappointments, e-commerce has bee growing consistently for over twenty years. There will be more developments and changes. Some will be slow, some will be faster. But people’s habits and behaviors don’t change as quickly as the gee-whiz prophets wanted us to believe.

In all this there are three basic facts.

  • Technologies work when they fit people (not vice versa.)
    See The stupidity of technologies.

  • The key to success is service – carefully tailored, and constantly verified over time, to meet the real needs and desires of customers.

  • All sound business, especially online, is built on mutual trust. It takes time and care to establish and develop strong relationships.

back to top


loghino.gif (1071 byte) 2. The “bubble” misconception

There are still discussions on the “financial bubble”, but they continue to be based, most of the time, on a misconception. It wasn’t caused by the development of information and communication technologies.

Financial adventures and collapses, often combined with scams and swindles, had happened in several different situations – and a long time earlier (see “Robber barons” aren’t new.)  In the last two decades of the twentieth century there were some new developments, with wild stock trading and financial trickery, as well as corporate strategies based on financial deals rather than effective management.

The overwhelming trend of mergers and acquisitions, with all sorts of financial maneuvering, had caused serious diseases in the basics of the economy, long before they were offered a new opportunity by the venture capital adventures based on the delusion that a “new economy” was going to develop at a much faster speed that was realistically conceivable (see Is hasty really fast? and Do androids dream of electric money?)

It became clear later, with the collapse of large companies in other fields, that the problem had been there for several years – and its origins were on a wider scale that just the “high tech” sector.

The hype, of course, had been stupid. But when the crunch came some strange things happened. E-business, and the internet as a whole, were seen as collapsing (facts prove that they weren’t, and they continued to grow.)  And, at the same time, there was a manipulated craze for online stock trading – that added to the speculative mania and financial swindles. The consequences are sadly obvious.

At the same time (and that’s no coincidence) there was a dramatic loss of competence, dedication and motivation in many companies, with a deterioration of quality and service.

The time has come to go back to real business and real values. Offline, online or both.


back to top


loghino.gif (1071 byte) 3. Advertising in Italy (online and off)

In issue 67 (December 2002) we had seen that adversiting expenditure in Italy in 2001 and 2002 was well below the industry’s expectations. A review of this subject, with updates limited to one country, may not be interesting for international readers. But some of the symptoms are not very different from what is happening in other parts of the world.

According to data published in April 2004 by Intermatrix-Astra, on behalf of the advertisers' association, there was a slight increase in 2003, but the total remained below the level that had been reached in year 2000.

This table shows advertising investmens in mainstream media and in the internet in the last five years.

Advertising investments in Italy

(millions of euros)

  1999 2000 2001 2002 2003
Television 3,837 4,047 4,139 4,150 4,335
Print 2,698 3,304 3,086 2,874 2,864
Outdoor 598 688 915 669 687
Radio 431 499 458 440 470
Movie theaters 48 54 69 60 75
Total * 8,303 9,354 9,389 8,893 9,155
Internet 25 73 44 88 93

* Including production costs

Italy has always had a higher use of tehevision advertising, in proportion to other media, than most other European countries. That unbalance is getting worse, with television up 7 percent compared to 2000 while newspapers and magazines are down 33 percent.

Investmnìments in all forms of business communication are decreasing – and substantially below growth expectations. The picture, for advertising, is summarized in this graph.

Advertising in Italiy

(millions of euros)

The “pale” line for the total at the top
shows the trend as it was porjected in January 2001

Current projections indicate slight growth in 2004-2005 and are somewhat more optimistic about 2006 – when they expect to reach the level that in the past had been predicted for 2001. Advertising expenditure in Italy in proportiion to the size of its economy (GNP) are considerably below the average in Western Europe.

The next table shows advertising by type of productor service in 2003 according to Nielsen (including only categories with more than 2 percent of the total).

Advertising in Italy by category – 2003
(percentages of total)

Food and drink 25.3
Motorcars 11.8
Personal care and toiletries 9.4
Telecommunication 8.2
Clothes 6.3
Publishing and media 6.2
Household goods 4.1
Real estate 3.8
Distribution 3.5
Finance and insurance 3.4
Health care 2.9
Tourism and travel 2.3
Personal objects 2.1

Packaged goods (especially food) are back in the lead. "High tech" products, that were advertising heavcily in 1999-2000, now are much less visible –woth the only esception of "telecommunications" (mostly cellular phones, with telcoms investing heavily to sell new gimmicks in a mature and highly profitable market.) If we combine categpories such as “photography and information technology” and “audio video” the sum now barely reaches 2 percent of the total. Also banks were more active in communication a few years ago than they are now.

At the time of the “bubble” advertising expeniìtures in Italy, as in many other places, by “new technology” compamies were aimed at attracting venture capital or lifting stock prices rather than producing results in the marketplace. And that accelerated theor demise.)

Online advertising appers to have gworwn in 2003 to about one percent of the totalo (but we must always remember that about half of that is bartering inside the sector, so real money is about 0.5 percent – probably less, because web ads are often gieavways in the negotiation of more expensive media). That is enpormpously less that was expected four or five years ago, but a little more that was projected more recently, as we see in this graph.

Online advertising in Italy

(millions of euros)

The green line shows the forecast
hat was made in January 2001.
The red line is the projection
by the same source in 2002.

There appears to be slight, and unexpected, growth in 2002-2003. In any case web advertising is a very small part of online business activity

The next graph compares the evolution of web advertising with the total growth of online activity in Italy.

Internet hosts and online advertising in Italy
1999 = 100


Of course not all online activity is business. But it’s clear that Italy’s general development iin the internet (see European and international data) is much larger, and growing much faster, than it would appear by loohing at the tiny figures of advertising on websites.

Earlier comments on this subject are in issues 6, 16, 44, 56 and 67.



back to top back to summary


Gandalf homepage