Start the revolution Without Me

Internet usage isn’t sweeping the entire globe at the same pace. So don’t rush into that online sweeps in India.

With half the world’s population still without telephone service – more than 100 years after Alexander Graham Bell (or whomever you wish to credit) invented the contraption – proclamations of Internet proliferation need to be taken with a grain of salt.

Web-based entrepreneurs are quick to say that the people with Internet access are “the ones that matter,” because they are the most affluent, savvy, and marketing-friendly consumers on the planet. They better be, because a lot of their less-savvy peers aren’t going to be surfing the Net anytime soon.

According to information compiled by Stamford, CT-based Simba Information (an affiliate of promo), the Internet isn’t growing at the same rate everywhere in the world, and most foreign markets are lagging far behind the U.S. in terms of total penetration.

How responsive will foreign consumers be to a medium that’s been shaped and dominated by North America? There are some who think that the electronic age has turned a lot of marketing messages into benign white noise. But in many foreign markets, the response is even more antagonistic, from both a regulatory standpoint and a consumer attitudinal angle.

THE NUMBERS

In terms of total users in 1999, Japan boasted the most outside the U.S. (which had 111 million users, 41 percent of the population ) with 19.5 million, representing 15.5 percent of the country’s total population. In contrast, the United Kingdom had 13.9 million users, but that represented 23.7 percent of its total population. Canada was the third largest online nation with 12.7 million users, which represents 42.3 percent of the population – higher penetration than in the U.S.

Elsewhere, Sweden had a relatively small 3.9 million users, but that figure represents 44.3 percent of all Swedes. Switzerland boasted the largest growth from 1997 to 1999, with usage skyrocketing 350 percent – but reaching only 1.2 million users and only 16.2 percent of the population.

North America remains by far the largest arena for Internet usage, accounting for nearly half of the worldwide market (120 million users) and expanding at a compound annual growth rate (CAGR) of 46.3 percent, according to Simba.

While penetration in Europe and Asia still pales in comparison, the two continents are catching up. European usage totaled 28 percent (72 million users) of the total market in 1999, while the region’s CAGR is a whopping 142.5 percent. Asian usage accounted for 20.9 percent (53.7 million users), and has a 94.4 percent CAGR. Africa/Middle East and South America both have triple-digit CAGRs, but the growth represents an increase from virtually zero. Africa/Middle East accounted for 1.5 percent of total usage (3.9 million) in 1999, while South America registered 3.4 percent (8.7 million).

Those numbers are expected to change dramatically by 2005. Canada is projected to become the leading wired nation with 80 percent penetration, followed by Denmark at just under 80 percent and Australia at almost 75 percent. By contrast, Internet penetration in the U.S. should peak at 73 percent by 2005. Japan, the current leader, is targeted to grow to just 45 percent penetration by that same year.

Both the U.S. and Japan hit critical mass much earlier than other countries and, as a result, will have relatively low growth in the future. Despite the perception of China as an exceedingly lucrative market for North American businesses, that country remains near the bottom of the pile, with less than 10-percent penetration (although that still yields 200 million Internet users).

THE RULES

Of course, a high degree of Internet penetration doesn’t necessarily pave an easy-access highway for electronic marketers. Although the Internet is still in its Wild West heyday as far as government or industry regulations, indigenous attitudes toward traditional marketing are expected to eventually be carried into the virtual world – and perhaps to a greater degree.

Until now, online regulatory efforts have primarily focused on protecting children’s rights, although broader restrictions are expected as Internet promotions become more mainstream. Here’s a look at some local attitudes to keep in mind when plotting global expansion:

South Africa could be the most promotion-friendly foreign market there is. Most marketing vehicles used in the U.S. are in evidence there, and they’re employed in very similar fashion. Rules are fairly non-restrictive. Pleasantville, NY-based Readers’ Digest, for example, is an aggressive product promoter in South Africa.

While Asia certainly looks promising on paper, promotions are rarely used in the region. Hong Kong may look like an advertiser’s dream: huge population, affluence, capitalist-friendly. But promotions are scarce despite little regulatory restriction.

Similarly, there is minimal use of promotion in Taiwan, again due more to societal perceptions than regulatory obstacles. While promotions in the U.S. are perceived by consumers as bringing added-value to a brand, Taiwanese consumers assume there must be something wrong with the product if it has to “resort” to promotional offers.

China and India offer enormous untapped populations, but social or commercial infrastructures don’t currently exist to make the nations feasible for online marketers. Commerce, as well as politics, teeters on the brink of anarchy in Russia. The nation has few branded items and, consequently, little brand loyalty. Lotteries exist in Russia, but goods are still afflicted by availability issues and a poor distribution infrastructure.

Perhaps one of the best examples of potential pitfalls overseas lies in Denmark, which offers high Internet penetration (34 percent thus far) and a relatively affluent population. But promotions there are aggressively restricted. Three-for-two offers are banned; cold-call selling is permitted only for books, newspapers, magazines, and insurance; promotional gifts can only be of low value and related to the product; and competitions of pure chance are banned. (So much for Internet-based discounts, premiums, or sweepstakes.)

The Internet can provide an efficient sales channel to foreign markets, but in many cases marketers need to tread lightly. While American consumers are used to a constant onslaught of offline and online promotions – and could, in fact, be learning to expect it – many foreign consumers aren’t as welcoming.

Marketers need to understand consumer attitudes as well as government regulations to avoid harming their products’ appeal with misguided promotions.