Australia Still E-Commerce Gold Mine

Despite the fact that Australia boasts one of the highest online penetration rates in the world, a study released Monday by Jupiter Research shows that marketers, advertisers and e-commerce firms have yet to capitalize on the country's Internet revenue opportunities.

According to Jupiter, 40 percent of Australians have access to the Internet. However, the Australian online advertising market will total US$35 million this year, making up just 0.5 percent of the country's advertising spending, Jupiter said.

By contrast, Canada, which has a similar online penetration rate of 42 percent, has 1.7 percent of its advertising market online -- three times greater than in Australia.

Just 12 percent of Australian Internet users expect to buy something online this year, compared with 40 percent in the United States and 25 percent in Canada, according to Jupiter.

"The status of online advertising and commerce is typical of the Australian market, where reluctance on the part of consumers and of businesses has dampened the revenue potential that such high online penetration offers," said Jupiter analyst Guy Cranswick.

"Combined with the limited scale of the market and the flight of Internet traffic to U.S. sites, online players in Australia face a tremendous barrier to reaching profitability," he added.

One big barrier is the amount of time Australians spend surfing the Web, Jupiter said. The average user in Australia spent less than 10 hours online in August, compared with 15 hours for the average U.S. user, according to Jupiter Media Metrix.

Refocus on Value

Companies in Australia should "act now to adjust their business models" to get consumers' attention, the Jupiter report said.

"It's not about mirroring U.S. success , but changing the market's perception of what the medium can offer," said Cranswick. "They must refocus on business models that sell the value of the medium, including using site research to justify marketing online, selling the quality of the audience, and working with advertisers to ensure the most appropriate placement."

In June, a Jupiter report said that online advertising spending in the Australia/New Zealand region was expected to grow from $24 million in 1999 to $462 million in 2005. That latter figure is less than 2 percent of the $28 billion predicted by the research firm for 2005.

Cranswick said that e-commerce companies must personalize service and build relationships with consumers beyond one-time transactions.