MarketLoop #12, June 2000

The Third Age of Internet

Remember when the Internet was termed New Media? This is hardly an appropriate term for a communications infrastructure that celebrated its 30th birthday during 1999. It is more accurate now to view the Internet as entering the next stage of its evolution- its Third Age. This Third Age will make the Internet radically different from what has gone before and will present a whole new series of challenges and opportunities for marketers.

Through the Loop has been tracking the development of Internet-based communications in order to assess where new opportunities will arise and how marketers can take advantage of this seismic change in the communications infrastructure. It is perhaps most easily understood by first considering what is meant by the Third Age of Internet.

The First Age

This is birth in 1969 until the development of the World Wide Web. During this time, the Internet evolved from being a US communications infrastructure designed for military purposes to wider use particularly throughout the academic and scientific community. Penetration of the medium was relatively low.

The Second Age

The next phase of development followed the development of the Web and the launch of the Mosaic browser. This enabled the Internet to move towards becoming a mass communications infrastructure. Usage evolved from niche to mass market in leading countries while the applications for which the Internet could be used became widespread. 

During this period the Internet became an important communications channels for marketing applications and many companies integrated it into their marketing mix for such uses as on-line shopping, consumer communications and brand development as well as internal uses such as company e-mail systems and supply chain management.

The Third Age

The Internet has just entered its third stage of development. This recognises the fact that the Internet is an underlying communications infrastructure and is not simply PC to PC communications. The technology becomes more diverse, taking on multiple delivery forms. While the PC will remain important, we are experiencing a fragmentation in terms of communications delivery mechanisms. Consumers will use these different devices, not limiting themselves to just one. Each separate device will be appropriate for different messages delivered in different ways. The Web, as we know it, will be just one manifestation of Internet communications.

The different devices will include the PC and digital TV. The immediate growth is almost certain to come through mobile phones and handheld computers. This provides the user with information anytime, anyplace. The next level of delivery devices may be household appliances which will increasingly be sold as network-ready, e.g. the smart fridge that reorders when products are used. Smaller devices will include access through the wristwatch or even, potentially, the networked person. The latter may enable remote health monitoring or even finding out exactly where your kids are through GPS!

Development of marketing communications messages through devices other than the PC are already underway. For example, the first advertising for WAP networks is already running.

Time is on my side (finally)

At last, a breakthrough that could solve one of life's fundamental problems. An aspect of the Third Age of Internet is that it addresses consumers' time squeeze to a greater extent. Information itself is merely a commodity and Third Age companies will recognise that in order to generate profit they will have to add value to information. Time has a key role to play here as value may be added through the relevance and speed of information.

Information providers will be able to deliver information to the consumer where and when he or she requires it. The type of information required and time when it is needed will determine the delivery mechanism. Information has different time values. For example, the morning newspaper is already out-of-date as it covers the previous day's news. Important items of news can be delivered direct to the consumer through mobile phone. Further detail can be found on the Web site accessed through the PC. However, both these delivery mechanisms do not make it easy to browse and so there is still a clear role for media such as newspapers for other types of information such as non-time specific or for reflection.

However, against this, is the possibility that the Internet is able to adjust consumers' time use. There has much been much debate about whether Internet users watch less TV or consume less of other media. This is missing a major point in that the Internet can help create time for consumers such as through saving time stuck in traffic for shopping or going to work. The Internet should be viewed as altering the make-up of the day rather than as a competitor for other forms of media.

Now it's getting personal

Unlike traditional marketing communications, Internet-based technologies enable marketers to genuinely address consumer needs through personalisation and one-to-one marketing. This is one of the most significant areas for the future success of marketing. Data that is gathered through purchasing profiles or anonymously through Web site browsing can be used to improve the user's experience. The biggest benefit of this is that it makes the site easier to use. However, addressing individual consumers strengthens the relationship through a higher level of user satisfaction and is more likely to lead to greater usage and higher sales.

Quicker than immediate

Internet time is a whole new concept. Not only does it allow the delivery of information to where you need it but the Third Age will also allow pre-empting of consumer requirements through personalised delivery of information. Information services allow the consumer to choose the information they want and how it should be delivered. This can also be personalised further and adjusted over time so that the level of relevance of the information continually rises.

Internet rotates on its axis

Until now development of the Internet has been driven by the USA. As it moved through its second age it expanded around the world with some countries and regions, notably Scandinavia, recording very high levels of penetration. However, the Third Age will shift the balance of power to Europe. The high level of mobile phone penetration and market importance of companies such as Nokia and Ericsson means that developments in this area will be driven out of Europe. Furthermore, the world's largest mobile phone network is Vodafone Airtouch. In a few years it may appear that its $181 billion acquisition of Mannesmann was a bargain, regulators permitting!

However, the shift in balance of power is not just about the suppliers in the market but it will also be consumer-driven. Disposable income has hindered Internet development in some countries through a low level of PC ownership. However, the ability to access the Internet through other means, most notably mobile phones, inevitably opens up this communications network to more people. In some emerging markets such as Central and Eastern Europe, mobile phone connections are growing faster than fixed lines and certainly faster than PC expansion.

Furthermore, there is an argument that the Third Age of Internet will diminish the gap between have and have nots. The ability to afford a PC and Internet connection is viewed as accentuating this gap. However, the newer access devices such as digital television and mobile phone tend to have a higher penetration than PCs and will thus enable a higher proportion of the population to go on-line. Access to the Internet is therefore less of an issue. The ability to use the information is another matter though.

Summary

It is clear that the proliferation of Internet devices will require an in-depth understanding of how the devices are used. Each type of delivery will use the Internet as its communications infrastructure but will deliver information in a different format. Consumers will choose a variety of devices to access varying levels of information at work, at home or on the move, whichever is the most convenient. The format of the message will depend on what it is saying and the intended delivery device.

The Third Age will mean new marketing opportunities. In turn, this means that marketers will have to rethink how they communicate with consumers. The new delivery devices will enable marketers to deliver communications messages that are appropriate for the device. Recognition of the fact that the Internet has become personal and portable will be a key to future success.

Tracking the consumer and the way in which the medium is used will become increasingly important. Companies that develop an in-depth understanding of consumer behaviour and how the different access devices are used will have the most to gain from the Third Age.