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Net Surge
By Michael Alan Hamlin
October 25, 1999
New survey and revenue results released
last week showed increased Internet usage in Asia and the Philippines,
and further evidence that technology will fuel the new Asian economy.
ACNielsen reported that desktop ownership among the Philippines’
business elite, for example, grew a whopping 65 percent last year,
providing 58 percent penetration among affluent professionals.
That figure is still low compared
to the rest of the region — desktop penetration among the elite
was 83 percent in Taipei and 81 percent in Singapore, for instance
— but the Philippines will obviously catch up if that growth
rate is maintained. Results of a new PriceWaterhouseCoopers and
World Economic Forum survey suggest that it will be.
That survey, conducted among 334
Asian CEOs around the region, revealed that 67 percent of the respondents
believe that Internet-commerce will have a significant impact on
competitiveness in their industries. This was particularly true
among bankers, likely because Internet-banking transaction costs
are a fraction of ATM transaction costs. Increasing competition
in the banking sector makes lower transaction costs a key "viability
variable" for banks.
Other businesses will feel the impact
as well. The ACNielsen survey reported that one in 20 Internet users
in Asia has used it for financial transactions. An earlier ACNielsen
survey revealed that Internet-commerce is growing rapidly in Hong
Kong, suggesting strong growth elsewhere in the region as well given
the rapid growth of Internet Service Providers, new accounts, and
commerce sites across Asia.
In Hong Kong, the number of people
shopping on the Internet doubled to 110,000 last year. So did revenues,
to HK$76 million. Internet usage is expected to pass the 1.5 million
mark by the end of this year, according to the survey.
For a feel for how Internet-commerce
is fairing in the Philippines, it’s interesting to revisit
Ramon Garcia, Jr. of DFNN.com fame (Full Disclosure: My firm has
done work for DFNN.com and I continue to receive assignments from
Mr. Garcia.). You’ll recall that DFNN.com — the Philippines
first financial news portal that also links online stock brokerages
— was formally launched last July. At its launch, Mr. Garcia
says that the portal was receiving 5,000 to 10,000 hits a day.
Less than three months later, DFNN.com
is receiving 50,000 hits a day from users on three continents interested
in owning Philippine equities. Mr. Garcia declines to say how many
users actually visit an online brokerage and invest in equities,
but the 50,000 hits suggest a good many do. So, too, does the fact
that four out of every 12 hits — one third — come from
the U.S. In fact, Mr. Garcia is getting so many hits from the U.S.
that he’s thinking of adding a server farm there to enhance
speed and service.
Hits from Philippine-based users
follow U.S. hits. Other significant visitor sites include Japan,
other Southeast Asian countries, Saudi Arabia, Canada, Europe, and
Taiwan.
There are other indications that
technology and the Internet will drive economic growth in the new
Asia and the Philippines. Microsoft reported last week record financial
results, up 30 percent last quarter from a year earlier. Greg Maffei,
Microsoft’s chief financial officer, cited "awesome"
demand for computers. You should know here that yet another ACNielsen
study of U.S. consumer purchases of personal computers revealed
that Internet access is the number one reason for new computer purchases
(It’s also interesting to note that first-time purchasers are
principally motivated by educational needs.).
But look where much of the growth
is coming from: Microsoft’s revenues from Asia rose 82 percent
for the quarter to US$593 million. So it’s no surprise that
the ACNielsen technology in Asia survey found that the ranks of
the affluent purchasers of computers and other high-tech gadgets
swelled during Asia’s crisis.
What of Asia’s less affluent
and their capacity to capitalize on the potentials of the Internet?
If experts are right that Internet usage patterns in Asia follow
U.S. patterns by about 24 months, we can expect to see big changes
in the next two years. ACNielsen found in August that penetration
of personal computers is approaching 30 percent of households in
lower income brackets.
But there are others who say that
Internet usage will grow much more rapidly in the Philippines and
Asia among both affluent and lower income households than it has
in the United States, principally for two reasons. First, Asia is
adopting and adapting the Internet, rather than pioneering a new
technology, as was the case in the United States. Second, Asia has
significantly fewer technology relics to tear down and write off
financially before it can invest or adopt the latest networking
and communications technologies.
Peter S. Cohan, author of Net Profit,
following a recent 10-day tour around Asia returned to his home
base in Boston and promptly wrote me that he returned convinced
that Asian enterprises are better positioned to capitalize on the
Internet than many U.S. companies. For Mr. Cohan, Asia is becoming
the wired universe in terms of quality and new technology, while
the U.S. struggles with the costs and bureaucratic hurdles of keeping
up with the pace of innovation.
The increasingly apparent emergence
of small, out-of-the-spotlight entrepreneurial technology clusters
in Asia to me is further evidence of both how well-positioned Asia
is to capitalize on the Internet and technology, as well as the
harsh reality that most high-profile, government-championed technology
zones won’t be much more than assembly zones for many years.
The real action — in this case
as it was and is in the U.S. — will come out of the equivalent
of backrooms and garages and dilapidated enclaves in low-rent districts.
Gary Hamel writes in the most recent issue of Harvard Business Review,
"Face it: out there in some garage, an entrepreneur is forging
a bullet with your company’s name on it. You have only one
option: you have to shoot first."
A slight revision portends Asia’s
Internet and technology future: Out there in some truly forgettable
place, an entrepreneur is forging a bullet that will change the
way business is done in Asia. You have only one option: become like
him.
Copyright © 1999 The Events
& Awards Managers of Asia and
Hamlin-Iturralde Corporation. All rights reserved.
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