[Seri column]The Internet’s next frontiers

We often find people who set out on a journey for a purpose deemed extraordinary. Bodhidharma went east to search for teachings of Buddha while Columbus sailed west to seek a sea passage to India. If they were to start the same journey today, they would surely begin on the Internet, today’s knowledge venue for billions of people, regardless of border and race.

The Internet is such an essential part of our lives at work and at home that it is hard to remember life without it. In fact, it has only been about 10 years since it became firmly entrenched in the industrial fabric, particularly in Korea, which now boasts the world’s fastest high-speed Internet infrastructure.

Still, from a commercial standpoint, the Internet journey has only just begun. The possible byways and ideas seem as infinite as when Bodhidharma and Columbus embarked on their long explorations. They will transform the industrial landscape even more profoundly and require players to be savvier to survive in the unending quest to merge technology with consumer demands and needs.

Already the expansion of Internet access from computers to mobile devices has ignited an explosion of Web users. According to market research firm IDC, Internet access through mobile devices will surpass access through PCs by 2012. Internet accessible devices such as PCs, mobile phones, game consoles, etc. will increase to 3 billion by 2012 from 1.5 billion in 2008. Mobile devices will account for half of the total.

In response, competition is heating up among IT companies due to industrial convergence coming from the Internet. Media, advertising, and retail are experiencing deeper changes due to the Internet.

In the IT industry, major consumer electronics - mobile phones, PCs, and TVs - are transforming themselves into Internet-centric devices. Mobile phones, for example, are seeing a shift in use to mobile Internet terminals where full browsing is possible. This is the result of combining four elements: wider distribution of third-generation mobile telecommunications systems, low-usage fees or flat fees, more devices with full Internet browsing, and more mobile content. In short, mobile phones are turning into PCs as the trend toward openness and convergence alters the value chain of the mobile telecom industry.

In the case of PCs, netbooks - notebooks that are light and inexpensive with Internet access - are gaining attention. They can weigh less than 1 kilogram, cost less than $500 and have basic features. Since Taiwan’s ASUSTeK’s Eee PC arrived in October 2007 to strong sales, major PC makers like HP, Dell and Acer have entered the competition. The downsizing is affecting the component level, too. Intel has announced a low-priced CPU called the Atom.

In the media industry, production, distribution, and consumption are also changing rapidly. Now, anyone can easily produce content through digital devices and then distribute it on the Internet. Seeing its traditional cost and distribution barriers dismantled, the media market has shifted from a quasi-monopoly to overflowing. That has separated the value chain into traditionalists (TV and newspapers) and into a new axis of video and newspaper distribution through the Internet. The media industry now can not be considered without the Internet.

Online advertising, for example, now approaches traditional advertising in terms of influence. Korea’s online advertising market started in 1996 as a niche market comprising only 0.2 percent of the entire market. By 2007, it was the third-largest media market behind TV and newspapers. TV ad costs increased 1.4 percent annually between 2002 and 2007, while online advertising costs surged 143.6 percent.

As Internet use expands from home PCs to “Internet anywhere,” e-commerce is also expanding. Low prices, more choices, shopping for devices any time, and personalization are affecting consumption patterns. In addition, the recent global economic downturn is likely to contribute to further expansion of Internet distribution. IDC puts global e-commerce annual market growth at 16 percent between 2007 and 2011 to $618 billion.

All told, the Internet is likely to reshape the landscape of IT and other industries during the next three to four years. With all roads leading to the Internet, the industrial landscape will increasingly have the Internet as its axis. In this environment, companies need to take advantage of this new paradigm shift and seek ways to reinvent their business model to create new markets. Strategies to provide integrated value to customers, from devices to services, will be critical. To provide this integrated value, companies will need to make optimal use of their internal and external resources in areas where they lack competitiveness.

The writer is a research fellow at the Technology and Industry Department, Samsung Economic Research Institute. For more SERI reports, please visit www.seriworld.org.

\by Kwon Ki-Duk