At the recent AO Summit, Jonathan Miller, Chairman and CEO of America Online said the Internet is still changing people’s behavior and consumer demands. This is the first of a four-part series.
I have an admission to make: I think that all of the promises that were made about the Internet were true. They haven’t all been realized yet, but they were fundamentally true. The network effect, for example, remember that? It’s behind eBay, it’s behind our own ICQ at AOL. My colleague and friend, Ted Leonsis, likes to talk about the network effect in instant messaging, one of the great applications on the Internet. That promise came true.
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The Internet is also going to be a terrific communications medium, uniting presence, location, and different forums of digital communications. That promise is going to be true. Again, look at instant messaging. Or for that matter, entertainment. The Internet is clearly becoming more and more an entertainment medium.
Then there’s commerce. There’s been a rush to spend money for advertising. There was a belief that the Internet was going to change commerce overnight. It didn’t happen. But you know what? Over time it will. It’s happening now. Look at the growth now in interactive ad sales. We’re seeing areas of commerce being built that are very robust. Again, here’s a promise that is true over time.
Another emerging phenomenon is intermediation, taking inefficiencies out of the market. That’s happening.
People also thought that the Internet was going to displace television completely. But it never works that way. Television didn’t displace radio or film, so why would the Internet displace TV? But nevertheless, there are some profound effects going on here. Our research shows that people who use the Internet regularly watch less TV than before.
So what happened? What went wrong with all these promises? Why didn’t they materialize right away? Three reasons. First, consumer behavior had not evolved to accept all that the Internet has to offer. Second, products and business models weren’t there yet. Businesses were started too soon. They didn’t have the strength to last. They didn’t have a good enough model. The products weren’t good enough. But that, too, is evolving. And third, bandwidth wasn’t there. It wasn’t readily available to create an always-on environment. But it is now.
So I submit that always-on is the next phase of evolution for the Internet. This may be a bigger jump than anybody has imagined before, and it’s going to accelerate from this point forward as those conditions that were missing before become prevalent.
The most important of these changing conditions is the rise of the broadband user. Research shows that the always-on, broadband environment will soon be more than half of the home-based market.
If you’re an MSO or a cable industry analyst, you tend to talk about bandwidth in terms of high-speed data. But I think the more important notion is that it’s always on. That is the profound changing effect. It is not just about high speed. In fact, I think speed is a secondary concern; always on is the primary concern.
And there’s more. The online experience is not just always on, it’s also always with you. It may be with you as you go throughout your household. Today, 12% of American Internet homes have home networks, but in broadband households with more than one PC, that number is 45%, and growing very fast. People want to have the online experience not just always on, but always with them as well.
Married to that is the whole idea of presence. Presence is what underlines instant messaging which is clearly one of the real phenomena of the Internet. Three quarters of Internet users instant message regularly. That includes 90% of 13-to-17 year olds. At AOL we pass over a billion instant messages a day through our system. This is a real phenomenon.
And people don’t just instant message, they customize their communications. 85% of IMers use buddy icons. The most popular icon? The penguin. That’s the most popular buddy icon in the world. I don’t know why; our research isn’t quite that detailed. Of course, people want to share files and photos in this environment, but it’s all based on the presence—the buddy list; that feeling of always knowing who is with you online.
The next stage of all this translates to a mobile environment. We’ve all heard the numbers. There will be a hundred million wireless web users in the U.S. by 2006. The real growth in terms of online development is in the mobile world. Today, it’s been mostly used as a communications tool—voice and messaging. But that too is beginning to change. We’re starting to see ring tone be a real business. In fact, in Europe record companies make more through ring tones than they do selling singles. It’s not about the fidelity, is it? The ring tone is not a high-fidelity product. But it fits into people’s lives. It’s always with them. They get to enjoy it whenever they want. So all of this will translate from an always-on environment to an always-with-you environment.
Next Week: Broadband Behavior: I Want My Info Now!
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Member Comments
If AOL wants to continue to be relevant, it must give its power users "hands-off" treatment in order to maintain their place in the wired world. There is only so many newbies to count on.
If you say you embrace the internet and its paradigm shifting properties, why is AOL an enclosed service outside of e-mail and IM? Why have you placed many of the most popular and highly trafficked websites of People, EW, Fortune, and Business 2.0 behind a firewall, only accessed to AOL and print subscribers? How can AOL be a leader for the New Internet when it is still bleeding dial-up customers and has barely penetrated into broadband aside from its own cable service?
Ciao.
garfangle | POSTED: 08.26.03 @20:09 | I rated this blog: [3]
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