THE DIGITALFILIPINO STATSREPORT
THE DIGITALFILIPINO STATSREPORT
SMBs SHOULD INVEST IN THE INTERNET NOW
here’s no doubt that the Internet can change the way our entrepreneurs do business. For most of them, the high cost of putting up the necessary infrastructure is a major hindrance to reach that stage. Although there are a lot of providers offering free e-commerce solutions, entrepreneurs don’t simply buy such an idea especially if the long term plans and viability of the company is questionable. It is the same if the service provider is a startup. However, entrepreneurs are being requested to go online right now to start dealing with suppliers and major customers over the Internet, with the use of email and ecommerce. In two years, the same important business partners will demand for it. This is a trend we’re seeing to happen to buyers especially those who are members of business-to-business e-commerce sites like BayanTrade.com. According to Gartner’s Spotlight report “SMBs: Tiptoeing Through the Internet”, web content management and e-commerce solutions prices are falling, making this year an excellent time for Small and Medium sized Businesses (SMBs) to invest in these areas. Jim Downing, VP and research director for Gartner advised SMBs to experiment now with Internet services that they perceived to be too complex and expensive to implement. “During these trials, SMBs can gauge the potential benefits of the Internet to their business and determine whether, and when, to embrace it more fully.” Web content management allows SMBs to update their website content easily and quickly. However, this costs a lot in the earlier years of the Internet phenomena. Now, any SMB can avail of these solutions at reasonable cost (US$50 per month and up). So many things have been said and written as to how SMBs can benefit if they go online. At the end of the day, I believe that those who will make the right moves now and invest in building their Internet infrastructure will be part of the market rebound when the time comes. As companies, both buyers and suppliers, are trying to reduce cost and keep their business afloat, the Internet provides an affordable medium in communicating with customers and reach out to new markets.
The following are useful references for this report. Ipsos-Reid - The U.S. Internet Fact Page (http://www.ipsos-reid.com) Computer Industry Almanac (http://www.c-i-a.com) “More is Not Enough: Bandwidth End Use Forecast and Analysis Study”, International Data Corp. (http://www.idc.com) GartnerG2 (http://www.gartnerg2.com) SMBs: Tiptoeing Through the Internet, Gartner Spotlight Report, Gartner Inc. ( http://www4.gartner.com/ 1_researchanalysis/focus/smb011402.html) Strategic Market Segmentation: How to Market to the Rich, the Middle Class and the “Masa” Dr. Ned Roberto, LifeCycle Press/Salt & Light Ventures (ISBN 971-8611-02-9) DigitalFilipino.com 1st Philippine Internet User Habits Survey WAP site (http://tagtag.com/jct) DigitalFilipino.com 2nd Internet User Habits Survey
THE DIGITALFILIPINO STATSREPORT
THE DIGITALFILIPINO STATSREPORT
Welcome to the first issue of the DigitalFilipino.com StatsReport!
Copyright 2002 by Janette Toral , DigitalFilipino.com. All rights reserved. This report or any part of it may not be reproduced, stored, transmitted in any form and means without the written permission from the author. L a y o u t , de s i g n a n d il l u s t r a t i o n s by Antonio Bucu. StatsReport subscribers who would like to ask questions related to this report can email the writer at: Janette@digitalfilipino.com or call +63-917-4974922
I’ve been following local and global information technology developments and assess its impact on Filipino’s lives. Despite the economic crisis, Internet and e-commerce is continuously growing as the users are beginning to achieve maturity and sensibility with their online needs. DigitalFilipino.com (http://www.digitalfilipino.com) started as a website in September 1999 to promote my first book, “DigitalFilipino: An E-Commerce Guide for the eFilipino.” Since the book launch last June 2000, the site has evolved and become an e-commerce research site. With the changing demands in information technology (IT), we began covering developments in the area of outsourcing and wireless technologies. I also have an active discussion group (http://groups.yahoo.com/ group/digitalfilipino) that started last September 1999 as an announcement list. It became a public discussion group in November 2000 with more than 1700 members at present. I definitely don’t know everything and this community serves as an important venue in keeping in touch with various Internet user concerns and points of view. Knowing that my site is a resource for researchers, I created a public message board at http://efilipino.community.everyone.net where queries can be posted. More than 900 research-related questions, answers, and announcements have been posted to date. Since last year, I’ve been doing Internet User Habits survey during exhibits and personal speaking engagements. The results of our 2000 survey work can be found in our WAP site (http://tagtag.com/jct) posted last June 12, 2001. Pressure from peers urging me to come up with a book 2 has always been there. However, I thought of coming up instead with this personal monthly newsletter referred to as DigitalFilipino.com StatsReport where subscribers can get updated results of our survey every month. Yes, DigitalFilipino.com has evolved again! More than anything else, this is your publication. I want you, my subscribers, to drive the content from this point on. Tell me what information you need and will do my best in producing the results in future issues. The Filipino has so much potential in making its mark and be recognized in the areas of web, outsourcing, and wireless. May this publication help you in making wise decisions and get the information that you need in the most affordable and timely manner. Mabuhay! Janette Toral Writer
ONE BILLION INTERNET USERS IN 2005
GETTING BUYERS ATTENTION
t is estimated that there are 490 million Internet users worldwide as of end-2001. By 2005, this can reach up to 1 billion. The Computer Industry Almanac predicts that increasing portion of Internet users in 2005 will be using wireless devices such as webenabled cellphones and personal digital assistants (PDAs) to go online. This can reach up to 48%. In developed countries, the wireless device will be supplemental to PC Internet access for most users. In the Philippines, we estimated that the number of Internet users as of end 2000 is 2 million. As more and more Filipinos going online everyday, we expect to reach 3.5 million Internet users by end of this year. This is due to the fact that the number of small and medium sized businesses (SMB), especially in the export sector, accessing the Internet is growing at exponential rates. Also, more and more schools are connecting
online, providing access points for the students. A good example that I can share in this regard is our personal experience in supporting Manila FAME (http://www.citem.com.ph). In the year 2000, we began judging website entries by exporters. At that time, there were only 7 exporters having online presence. This increased to 45 in 2001 and close to 100 this year. This does not include those who don’t have websites but began using email in their daily dealings. We intend to cover the developments in the SMB area in our future issues. By the year 2005, we’re expecting to see wireless devices to be the primary Internet access point for Filipinos as we reach seven (7) million. This is a common trend that will be seen in countries with low Internet penetration.
ommon mistake of our local merchants is the mentality of simply building a website and wait for its buyers to come. A lot offered various services that are available in traditional brick and mortar stores. Competing in such an environment is very limited and does not provide any unique advantage. Although targeting overseas Filipino workers can be attractive, one must remember that their buying habits are driven by seasonal occasions. Merchants engaging in the online business should formulate strategies to make themselves the shopping site of choice, both online and offline, for its target buyers. There are so many ways that the merchants can reach out to its customers. I consider the mobile phone as the most important marketing channel today. Our survey shows that all local online buyers have mobile phones and send an average of 18 text messages a day. More than half of them are users of value-added services. Notification of new products, regular updates on topics of interest, and allowing registered buyers to do a quick search on products can provide a lot of value to any online business. The online merchant must look into online and offline channels in doing business to make the buying experience convenient for the customer. Perhaps, this is the reason why MyAyala.com is slowly gaining ground in the market. Providing a service that intends to compliment the existing offerings of the center, especially its movie theater, is driving consumers to their end. However, its online mall can still be improved. Instead of doing everything alone, online merchants should consider partnering with content providers and network operators to achieve business objectives at the least cost possible. In the end, only those who’ll be able to achieve the highest customer retention will succeed. Customer usage must be studied diligently in order to come up ongoing programs to achieve customer loyalty and increase sales.
SUBSCRIBE TO DIGITALFILIPINO STATSREPORT DigitalFilipino StatsReport is a monthly newsletter giving an analysis on local and international statistical developments in the field of information technology, Internet, ecommerce, outsourcing, and wireless markets. As DigitalFilipino.com also does its own research and person-to- person surveys, its up-to-date status is also included in every monthly report. In addition, subscribers are invited to participate in our monthly briefing where and when the report is released. The fee for this service is only US$150 per year (for the first 120 subscribers). This package includes 12 reports with the option of participating in our monthly briefing.
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ABOUT THE WRITER
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Janette Toral is an IT writer, speaker, consultant, educator and lobbyist. She founded the Philippine Internet Commerce Society last September 1997 and got heavily involved in working for the passage of the country’s Y2K Law and E-Commerce Law. She has written articles for international publications such as Business Online, asia.internet.com, and World Executive Digest. She published her first book in June 2000 titled, “DigitalFilipino: An E-Commerce Guide for the eFilipino”. She’s frequently invited at various IT conferences to talk about information technology, web, outsourcing, and wireless developments in the Philippines. An IT practitioner, she has more than 13 years of combined experience in the areas of research, training, marketing, business planning, technical support, and project management.
THE DIGITALFILIPINO STATSREPORT
THE DIGITALFILIPINO STATSREPORT
GUIDELINES FOR MERCHANTS
THE FILIPINO ONLINE SHOPPER
lot of the local dotcoms fail as resources were wasted by putting up online sites that compete with products available through direct sales and nearby shops. Some merchants created an all-in-one shopping site, trying to target a broad segment of the market, without understanding the Internet, lifestyle habits, and attitude of its target market. Majority of the present sales by merchants are from overseas Filipino workers and hardly from the local Internet community. A lot relied as well with online advertising as its main source of revenue. Admittedly, there’s no silver bullet solution that can guarantee e-business success. There’s no effective benchmark and role models that can be used as a guide in determining the success factor of e-business as everyone is still struggling for survival until now. However, there are small lessons here and there learned along the way shared in discussions with entrepreneurs and ebusiness managers. It is no longer enough to say that one wants to target the rich, middle class, or the masses. One must take the effort in understanding their habits, culture, and lifestyle. A good book on this subject is Dr. Ned Roberto’s “Strategic Market Segmentation: How to Market to the Rich, the Middle Class, and the Masa” (ISBN 9718611-02-9). The classes of Philippine society, I believe, are accurately depicted in this book. To compliment, I’m sharing here my take on Dr. Roberto’s book and some online business pointers that can be taken into consideration by our readers. Based from the shopping habits that we’ve seen from our survey, majority of our online buyers right now belongs to the upper middle class and the smart nouveau rich (SNR) market segments. Most products bought are meant for oneself rather than a gift for somebody else. SMART NOUVEAU RICH (SNR) The Class AB usually refers to the rich people. Dr. Roberto classified them into three types. They are the born rich, gross nouveau rich
(rags-to-riches), and smart nouveau rich (SNR). For this part, I’ll only focus on the last one. The SNR is a practical person that does not engage in lavish spending and gift giving. However, once in awhile, it indulges oneself in “self-gifts” as a form of reward, inspiration, or morale booster in tough times. The online buyers from this segment are great targets for “self-gift” type of products and services. Merchants should strategize the packaging of one’s website and gear towards the “indulge” message in its marketing. As times are tough and people are pushed to the limit, products and services that will give relief and understand the pressure of this segment will definitely attract attention. Great bargains but practical items can also be of interest to this segment. UPPER MIDDLE CLASS The middle class sector or Class C passed the poverty level and are doing reasonably well in their lives. Dr. Roberto classified this segment into two groups: upper middle class and the broad C segment. For this part, we’ll look into the first one. The upper middle class is composed of people who are in the peak of their careers and businesses. They have hectic work and business schedules. They are the pressured ones as well in ensuring that their family will have good food on the table, highquality education for their children, and take care of oneself in terms of health and grooming. The pressure and stress of this segment are considered as self-inflicted because of their desire to achieve their dreams and ambition. These are the people who will move later on to the Class AB segment. They can either become an SNR or a gross nouveau rich (GNR). The GNR are people who became rich
but not ready for it. In order to fit in, they engage in extravagant spending and rich lifestyle activities. The SNR online buyers are maturing. They appreciate the value of the Internet and mobile banking. They can be considered as the most active user of Internet services. Some of them are surfing the Internet using GPRS-enabled mobile phones. For the online merchant, they are the prime target for gift products intended to be given to loved ones and corporate clients. They are also target for products and services that caters to whims and needs of people on the go that can help them in their daily “being organized” rituals and “on-the-go” power looks and lifestyle. However, one must construct its offer and service so well that it would become the preferred provider of choice than its physical world counterparts. Because of their busy lifestyle, marketing to this segment must be complimented in all forms such as direct marketing and trimedia advertising, in order to merit its attention. Offers must be made in its simplest and quickest form. There are online buyers in other segments of Philippine society but their habits and lifestyle still needs to be understood further from our end before giving more inputs. We’ll tackle that in future issues.
n the Philippines, there are various reports as to how much has Filipinos bought online. I’m currently doing a survey on this one and hope to be able to provide a much more conclusive figure in future issues.
The Philippine Internet User Habits survey happened 1st half of last year (2000), Respondents are from Tacloban, Davao, Cebu, Cagayan De Oro, Zamboanga, and NCR. From that survey, we were able to summarize that Filipino online shoppers buy books, computer software, music CDs, computer hardware, and mail-order items. Popular shopping sites were Amazon (http://www.amazon.com), Barnes and Noble (http://www.bn.com), E-Bay (http://www.e-bay.com), Yahoo Shopping (http://www.yahoo.com), and CDNow (http://www.cdnow.com). This year, the research began last February. Respondents are from Cebu, Davao, Manila, Iloilo, Batangas, and from different parts of the country. Response from online buyers show that the top 5 products and service, out of 20, Filipinos buy online are books (54%), computer software (33%), domain name (31%), web hosting (25%), and computer hardware (24%). The top 5 sites, out of 79 named, where Filipino buyers shop are Amazon (http://www.amazon.com) (54%), E-Bay (http://www.e-bay.com) (11%), MyAyala (http://www.myayala.com ) (11%), Network Solutions (http://www.netsol.com) (8%), Barnes and Noble (http://www.bn.com) (6%), and Register.com (http://www.register.com)(6%). Obviously, what this tells us is that Filipinos are still fond of buying the latest books online. Amazon.com and Barnes and Noble have remained consistent among Filipino buyers because of its vast selection of book resources. Local bookstore sites should take this seriously. A lot of earning opportunities are being lost by the local bookstore to these online sites. They must innovate or else lose the market they are supposed to earn their revenues from. Although local auction sites did not click, E-Bay remains to be a favorite as the site serves as haven for good buys and deals. Surprisingly, a local site has entered our list. MyAyala.com began achieving acceptance among Filipino buyers. To think that a lot said in the past that buying movie tickets online and reserving theater seats won’t do well, but think again. Most of MyAyala.com buyers that we interviewed visit the site for that specific purpose. What more if all movie theaters and events nationwide will have this facility? I believe that this can play a big factor in helping the entertainment industry. It is interesting to see also that a lot of the people we interviewed have invested significantly online by buying a domain name and avail of web hosting services. On the down side, it only shows that foreign web hosting providers are the ones benefiting at this stage. Until our local providers become more competitive in their service offerings, it will continuously lose market share from competitors abroad. METHODOLOGY The result of our Internet user habits survey does not speak for the entire industry. I gather data through traditional means and will cover more location and depth as it progress. I hope that this effort will help guide readers in assessing various research reports, to come up with business decisions. This will be updated regularly and mention the sites where Filipinos buy for every product category and the amount spent in future issues.
What Filipinos Buy Online (2000) What Filipinos Buy Online (2000) • Books • • Computer software • • Music • • Computer Hardware • • Catalog/Mail Order • What Filipinos Buy Online (2001) • Books • • Computer software • • Domain name • • Travel services • • Web hosting •
• Amazon • • Barnes and Noble • • Ebay • • Yahoo • • CDNow •
Where do Filipino Online Buyers Surf • Yahoo.com • Yehey.com • Google.com • BWorldOnline.com • Inq7.net • DFNN.com • CNN.com • PinoyCentral.com • Hotmail.com • PinoyMail.com • Philstar.com
Purchase Average – 2000/2001
21-24 25-28 29-32 33-36 37-40 41-45 46-55 56 and up 0 500 1000 1500 Purchase Amount 2000 2000 2001
Single – 38% Married – 58% Widowed – 1% Separated – 3% 37% of married/widowed/ separated with 2 kids 29% with 1 kid 26% with 3 kids.
NCR – 72% Mindanao Region XI – 7% Region XII – 1% Visayas Region VI – 1% 16 and below 17-20 21-24 25-28 29-32 33-36 37-40 41-45 46-55 56 and up Age Group 0
Where do Filipinos Buy Online (2001)
Amazon (54%) Ebay, MyAyala (11%) Network Solutions (8%) Barnes and Noble, Register.com (6%) US$522.13 average annual purchase per user
Civil Status - Married
21-24 25-28 39-32 39-32 33-36 37-40 41-45 * 46-55 ** 56 and up 0 20
Region VII – 8% Luzon Region V – 1% Region III –3% Region IV – 4%
* Some are separated ** Some are widowed
Top Mobile VAS Applications • Logos and icons • • Ring tones • • Picture messages • • Daily News • • Banking • • Games •
Where do Filipinos Buy Online (2001)
5 10 15 20 25 Percent (%)
44% PDA ownership
40 60 Percent (%) 80 100
Respondents Profile (357)
ISP Subscription Pacific Internet PLDT DSL Infocom Mozcom DigitelOne
16 and below 17-20 21-24 25-28 29-32 33-36 37-40 41-45 46-55 56 and up Age Group 0 20 40 60 Percent (%) 80 100
86% access the Internet from Work 96% computer ownership 72% access the Internet from home
Health Sites 47% of online buyers search for health information online • Yahoo • • WebMD • • Google • • Dr. George, eDiets •
Online Buyers Non-Buyers w/ Credit Card Non-Buyers w/o Credit Card
60% college graduates 23% Computer Science grads 14% Business administration grads 37% masteral graduates 54% with MBA 12% with MCS (computer science) 3% college level
21-24 25-28 29-32 33-36 37-40 41-45 46-55 56 and up 0 20 40 60 Percent (%) 80 100
Personal Annual Income
21-24 25-28 39-32 39-32 33-36 37-40 41-45 * 46-55 ** 56 and up
• 21-24 years old – Books, computer software, information services • 46-55 years old – Books, travel services, music CD * Amazon.com favorite shopping site • 25-28 years old – Books, computer software, domain name, web hosting • Shopping sites – Amazon.com – Network Solutions – E-Bay • 29-32 years old – Books, domain name, web hosting • Shopping sites – Amazon.com – E-Bay – Register.com • 33-36 years old – Books, computer software, home electronics, travel services • 37-40 years old – Books, computer hardware • Shopping sites – Amazon.com – MyAyala.com
Mobile VAS Users
21-24 25-28 Age Group 29-32 33-36 37-40 41-45 46-55 56 and up 0 10 20 30 40 50 Percent (%) 60 70 80
Number of Text Messages Sent Daily (2001)
21-24 25-28 29-32 33-36 37-40 41-45 46-55 56 and up 0 5 10 15 20 25 30 Daily Text Messages Sent 35
43% Online Banking BPI – 52% PCI - Equitable – 13% Unionbank – 10%
29-32 33-36 37-40 41-45 46-55 56 and up 0 10 20 30 40 50 60 70 80 Percent (%)
400 600 800 Income (Thousands)