Digital TV: The Future of E-Commerce (Part IV)

In Parts I, II and III of this series, the E-Commerce Times explored the emergence of digital television into the public consciousness. The similarities to the early 1990s, when the Internet had about a million users, are striking.

Since 1990, the number of Internet users has increased to 172 million, and is expected to leap to 350 million by 2003. If similar projections hold for digital TV, virtually every household in major industrial countries will have a television that is connected to some type of interactive service. While many will have a limited free service like Wink, many others will have services that include high speed Internet access.

Furthermore, interactive components will be commonplace in TV shows and commercials.

Impulse Power to Drive E-Commerce

In This Report:TechnologyThe PlayersCurrent StateProjectionsNumerous research firms are projecting that during the next decade, U.S.-based business-to-consumer (B2C) e-commerce will grow from some $20 billion to several hundred billion dollars. Research firm eMarketer projects that B2C e-commerce worldwide will jump from about $5 billion in 1997 to $100 billion in 2002.

While few companies, if any, project beyond this period, most analysts expect that B2C e-commerce will continue its explosive growth well into the decade. Much of this e-commerce will originate from TV sets, rather than personal computers.

The key dates in the U.S. are when such major satellite companies as DirecTV and EchoStar will fully implement interactive TV — which should be by the end of 2000 — and when local cable TV companies will offerbroad access to such services. This process will take place in varying stages between now and 2003.

During this period, growth will be sporadic because services are not available. However, once services become widely available, growth will be explosive.

The following table is the E-Commerce Times’ projection of the growth of interactive TV viewers and Internet users in the United States from now until 2006. The projection of Internet users extends existing projectionsby eMarketer in a manner consistent with earlier growth rates.

Year2000200220042006Internet users 66 88105 115Interactive users 1 12 70 115Percent of Internet users 1% 14% 67% 100%* E-Commerce Times Projection In Millions

By 2006, the E-Commerce Times expects that virtually every person who uses the Internet will also use interactive television. The next table projects the growth of B2C e-commerce during this same period, separating PC-based e-commerce and television-based e-commerce. As before, the figures are based upon earlier projections of e-commerce revenues by eMarketer.

Year2000 2002 2004 2006PC-based $ 30 $ 50 $ 75 $ 105TV-based $ — $ 15 $ 45 $ 105Total $ 30 $ 65 $ 120 $ 210* E-Commerce Times Projection In US$ Millions

While PC-based e-commerce is expected to grow to $105 billion in 2006 from this year’s total of $30 billion, TV-based e-commerce is expected to match that figure. The major growth is expected to take place in 2005 and 2006, as interactive digital TV products and services muscle into the Internet user’s consciousness.

While the projections are made for the U.S. only, e-commerce on interactive television will have an enormous impact on a worldwide level. The impact,however, must be considered on a country by country basis, taking into account the various regulations associated with television advertising.

In countries that have similar policies to the U.S., e-commerce via interactive TV will likely equal or exceed PC-based e-commerce by the mid-2000s. In countries that restrict TV advertising, however, the impact will be less pronounced.

TV-based e-commerce revenues will come from three sources:

• E-commerce transactions that could have been completed via a PC
• Infomercials, which now generate sales via 1-800 voice numbers
• Impulse purchases

E-Commerce for Everyone

What is most remarkable about digital TV is that it has the potential to rise above gadgetry and convenience and deliver value to an untold number of people around the world. As the governments of the United States and United Kingdom face the “digital divide” issue in their respective countries, they can look ahead to digital TV and see progress on the horizon.

E-commerce stands to become as ubiquitous as the television itself, de-linking online shopping from the domain of the cyber-savvy and placing it squarely at the feet of all who want to take advantage of it. In the end, in a delicious irony, people will benefit from one of the last century’s newest technologies by way of one of its oldest.