Asian Internet use takes off
By Stephen Green

Internet use, particularly in China but across the rest of Asia as well, is exploding, making it geographically the world's largest market, altering consumer spending patterns and perhaps even the Internet's dominant language, according to an exhaustive new report on Asian online use by the New York-based market research firm eMarketer.

By the time 2003 is out, according to the report, "Asia-Pacific Online", Internet use in China will have nearly doubled to 114 million people online. In just two more years, 250 million Chinese are expected to be accessing the Internet. In South Korea, nearly 59 percent of the population is to be using the Internet by the end of this year. India's cellular telephone industry is adding 120,000 subscribers monthly and passed the 3 million mark in June. While in a country of 1 billion people that represents scant penetration, it indicates vast potential.

Those are all nuggets from eMarketer's 196-page assessment of the state and potential for e-business in the Asia-Pacific market, which was made public last week. It comes on the heels of a recent poll of 26 members of the Online Publishers Association (also New York-based) showing that Internet journalism is also continuing to become more lucrative.

Third-quarter ad revenue among the group, which includes all of the US's biggest conventional newspaper publishers, grew an average of 45.9 percent over the same period in 2002. Year-to-date ad revenues also were up 38.2 percent compared to the same period last year. The complete survey can be found at www.online-publishers.org. For four straight quarters, Internet ad revenue has grown more than 35 percent and appears set to continue to grow strongly into the future.

Given that growth, eMarketer's mountain of data on the Asia-Pacific online market takes on greatly enhanced value. Ross Rubin, senior analyst for eMarketer, said his researchers drew on original forecasts, research from government and international statistical agencies and dozens of firms such as Morgan Stanley, Gartner, Point Topic, IDC and the Yankee Group.

Among other topics, the report focuses on the numbers of people online across the region, the devices and technologies they use to get online, the demographic characteristics of the population and their most popular online activities - which, predictably enough, is online gaming. The online gaming market totaled US$533 million in subscription fees in 2002, with Korea and Taiwan constituting two of the world's largest markets. Koreans are a unique population when it comes to online gaming. They lead the world in that pastime, with 54 percent of the market, followed by Taiwan at 26 percent.

Likewise, online commerce is rising fast, with the percentage of online users rising close to or above the global average in selected countries. The expectation is that there will be explosive growth in Asian-Pacific use of the Internet for airfare, hotel and car rental bookings for both business and holiday travel, as happened in North America. Videos are another area with enormous sales potential. In Australia, Hong Kong and Singapore, a higher percentage of people bought movie or theater tickets online. PC-related purchases, electronics and travel were generally purchased by a lower percentage.

The popular notion is that sales leaders would be CDs, or perhaps software and travel bookings. Wrong. Books accounted for nearly a quarter of the region's Internet purchases in 2002.

Incredibly, only two percent of Singapore Internet users trade stocks and mutual funds online. In Taiwan, it's 5 percent and in Australia, 9 percent. That is in stark contrast to the US where routine business dealings are increasingly being transacted on the Internet. Even in South Korea, where online games are a major diversion, only 7 percent of the PC users employ the Internet for online purchases.

On a per-capita usage basis, Asians are fast catching up with the rest of the world, or surpassing it. By November, according to the report, the US had fallen out of the top 10 of prominent online countries. South Korea by contrast had climbed to fourth place, with Hong Kong ranking seventh and Taiwan ninth.

What is particularly striking is the pace at which Asia is switching to broadband, which allows for much more extensive graphics use, and which enhances commercial appeal for online advertisers. By the end of the year, broadband usage is expected to grow by 25 percent, to 18 million subscribers. A startling 94 percent of Korean Internet users will have broadband connections by that time.

"The increasing prevalence of Asians online has had a profound impact on the composition of the web," the report states. While English has emerged as a kind of Internet lingua franca, Mandarin is currently the world's leading language by a considerable margin and raises the possibility that Chinese will become the largest Internet language group in the world.

As a result, the report notes, a prediction that Chinese would become the web's dominant language "may come true one day". The marketing communications firm Global Reach found that Asian languages now constitute more than a fourth of the languages spoken by web users worldwide, although English still dominates.

Particular attention is paid by the report to eight "core" economies - Australia, China, Hong Kong, India, Japan, Singapore, South Korea and Taiwan. The Asia-Pacific region is home to more than half the world's population - 3.56 billion people. But China by itself, the researchers conclude, with 1.3 billion people "could be the world's largest Internet market in just a few years".

Internet Users in 8 Asia-Pacific Countries, 2001-2002 (in thousands).

	2000	2001	2003
Australia	6,600	7,200	8,400
China	22,500	33,700	59,100
Hong Kong	1,800	2,601	2,918
India	5,500	7,000	16,580
Japan	38,000	48,900	57,200
Singapore	1,300	1,700	2,247
South Korea	19,040	24,380	26,270
Taiwan	6,260	7,820	8,590

Note: Internet users ages 2 years and older who have accessed the Internet within the previous 30 days.
Source: International Telecommunications Union, October 2003.

The eight countries highlighted represent a mix of rapidly growing Internet populations, but there are significant disparities in economic and technological development. Japan, South Korea, Singapore and Hong Kong are all highly advanced, while China and India are just beginning to emerge as major regional and world economic powers. That, the researchers conclude, combined with linguistic, cultural and political differences, has resulted in tremendous variations in the level of Internet adoption and usage across the region.

It's notable that 5.1 million PC shipments were reported in the region during 2002 - a 100 percent increase from the previous year. Of those, the biggest share was purchased in China - 39 percent. China's computer giant Legend was the leading PC vendor in the first quarter of 2003 with 627,346 shipments or 11.6 percent of the market share. Hewlett Packard was close behind with 11 percent, followed by IBM, 7.9 percent; Dell, 6.5 percent; and Acer, 4.6 percent. Other manufacturers had the balance of the market.

The report indicates that e-government is a non-starter in the Asia-Pacific region. Mobile Internet services are well established in Japan, South Korea and Hong Kong, but are little used in other countries - even in densely populated urban areas. "Survey respondents cited small screens, the inability to see the tangible item, and information privacy and security were cited as major problems with mobile commerce," the report said.

Some of the most interesting data in the report comes from South Korea with its sophisticated level of Internet use. "For providers of interactive services, South Korea is kind of paradise. With both the highest broadband penetration in the world and highest-speed cellular network in the world, the small country has embraced advanced communication technology both in the homes and the popular Internet cafes, called bangs," the report concluded. "In addition, it is rapidly gaining on Japan as the worldwide capitol of consumer electronics with conglomerates Samsung, LG and Daewoo making major inroads in markets from DVD players to cell phones."

By 2005, eMarketer estimates there will be 33 million Internet users in South Korea, accounting for more than two-thirds of the population. The character of Internet traffic also has changed dramatically. In the early years, 98 percent of Internet traffic went overseas. Now, domestic traffic accounts for about 85 percent of the usage.

A survey of users found that 88.2 percent of Koreans surf the Internet for information. Another 79.2 percent use it for e-mail, 62.2 percent for online games, 61.5 percent for movies and music, 53.8 percent for news and 42.4 percent for online shopping. Instant messaging users in South Korea jumped from 27.5 percent in 2002 to 42.6 percent this year. Mobile phone subscriptions continue to increase with penetration now at 68 percent.

Elsewhere, eMarketer reported, Internet use can be profoundly influenced by localized crises. From March through May of this year, Internet use spiked in Hong Kong in response to the SARS (severe acute respiratory syndrome) epidemic. People stayed home and increased their use of the Internet for shopping, banking, news and researching medical information. Online news organizations also discovered that "hits" on their sites leapt markedly during the Iraq invasion as users bypassed television and newspapers for faster access to information on the Internet.

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