Why are Canandians (and Koreans!) so much more likely to use broadband? Part 3

It’s not just Canadians. Koreans are two and a half times as likely to have broadband connections as US households (57% vs. 23%). (See also Part 1 and Part 2)

Korean DSL connections are not only half as expensive, they are a lot faster, especially upstream.

Drawing conclusions about Americans from Korean behavior is riskier than using Canadian behavior, but it seems pretty obvious that the telcos the the main obstacle to widespread adoption of broadband. And I find it hard to believe they can’t make money at $25/month by lighting up wires that are already in the ground.

Korea’s secret? Encouraging competition with the monopoly provider. Didn’t we try that?

The United States has gone through a similar shakeout, except it happened before the broadband network was extensively built. The Telecommunications Act of 1996 set off a surge of expansion that collapsed when the Internet bubble burst, driving many of the broadband start-ups, like Rhythms NetConnections and NorthPoint Communications, out of business. While fixed-line operators in Korea and Japan were cajoled into making D.S.L. service available at low cost, analysts say that the Bells are reluctant to cut prices.

At around $50 a month, broadband costs about twice as much in the United States as in Korea and Japan. Worse, broadband in the United States is slower and less suited for interactive entertainment and other two-way uses because it relies on an asymmetric system that receives data much faster than it can send it.

The Bells say they are doing everything they can to promote broadband. But critics say the phone companies view broadband as more of a threat than an opportunity, so they have done little to rectify these problems.

We also failed to enforce the Telecommunications Act, allowing the Bells to starve their competitors.

The current broadband market is a drag on the economy. Billions of dollars in consumer investment in computers, peripherals, software, networking, downloadable music, and content are being held back back because of the low penetration and poor quality of our current broadband connections.

Research hints at new revenue pressure on telcos

TNS Telecoms says that per-user telecom spending in the US decreased in the fourth quarter of 2002, the first quarterly decrease in more than three years.

For years, telcos have been relentlessly focused on increasing ARPU (average revenue per user, not the guy who runs the Kwik-E-Mart) to the detriment of customer service and rational pricing. Between competition for zombie telcos, their inability to deliver any new value propositions to their customers, their debt chickens coming home to roost, and the Bush recession (or the Bush dip in the Clinton recession if you prefer) these guys have what positive thinkers refer to as “an insurmountable opportunity”.

Short-term, don’t expect the telcos to cut publishers any slack. They’re going to be looking for change under every cushion in the marketplace. Long-term, look for their receivers to loosen things up after they’ve written off their debts.

Why are Canadians so much more likely to use broadband? Part 2

McKinsey says Canadians are twice as likely as US citizens to subscribe to broadband. This despite the fact that, according to McKinsey, roughly the same percentage of households have access to broadband in Canada (89%) and the US (87%).

I first looked at this issue Monday, when Ipsos-Reid released broadband penetration numbers for Canada and the US, but I didn’t have the access data, so it wasn’t clear whether that was the reason for the difference.

Interestingly, roughly the same percentage of online citizens of each country are interested in broadband (49% in the US and 54% in Canada). Also, the reasons for subscribing are about the same — speed, always-on connection, keeping the phone line open.

So, why are Canadian broadband providers getting so many more takers for their services?

NOTE: There are some problems with these two studies. McKinsey says that 43% of Canadian online households have broadband and Ipsos-Reid says 54%. McKinsey says 27% US online households have broadband and Ipsos-Reid says 34%. I can’t account for the discrepancy between the two firms, but the message is awfully clear.

Flash continues to junk up the Web

I’m working on a project that involves using more corporate Web sites than I would if I weren’t getting paid to do it.

I am stunned by how many of these sites are using Flash for navigation and information and how badly this stuff works with all three of my Mac browsers (Camino, Safari, and Internet Explorer).

It’s sad how much they must have paid for these ugly, broken sites they present to the world.

One of the less-celebrated aspects of the blog phenomenon is how much activity there is in using CSS and simple, standard HTML to create fast, elegant sites that work really well. I’ve got a folder full of beautiful sites that I plan to steal ideas from for my next redesign.

Flash on a Web site is beginning to feel more and more like tailfins on a car.

UK Internet advertising is up 19%

it’s still less than £200m for 2002, but it’s up 19% in a year when US Internet advertising was down 17% . [Thanks, MarketingFix]

The only explanation I can think of for this remarkable performance is that the US was still digesting some bad revenue data last year. if that’s the case, it’s further evidence that the US Internet advertising market has already bottomed out.

The Internet Advertising Bureau and PriceWaterhouseCoopers, who released the study, say that Internet advertising was 1.4% of all UK advertising and “on track to hit its target of taking a 2% slice of the advertising market by 2004”. That would be a very satisfying 20% annual growth rate.

Free Research: Pew on why the Internet isn't for everyone

The Pew Internet & American Life Project has a interesting new report on who’s not online and why. One sixth of Americans are former users and a quarter have no direct or indirect experience with the Internet.

But an equally significant reason why people are not online is lack of desire—they do not want the Internet, do not feel that they need it, and do not feel that it holds anything of interest or value for them. They believe they are not missing out on anything by not being online. For some, this disinterest is based on incorrect assumptions about online content, but for others it is a reasoned choice, based on personal preferences for communication style and information retrieval or past Internet experience.

There’s a ton of information here and I’ll be going back to this report for more items later, but I wanted to make sure you knew it was available.

Why are Canadians so much more likely to use broadband?

54% of online Canadians are using broadband, versus 34% of US citizens who are online, according to comScore Media Metrix Canada. From CyberAltas:

“With more than half of our online population using broadband, it’s clear that Canadians are hooked on speed,” noted Brent Lowe-Bernie, president of comScore Media Metrix Canada. “The cable and telephone infrastructure in this country has allowed broadband service to flourish, and Canadian activity within the Digital Media landscape has responded accordingly.”

This raises more questions than it answers about a staggering gap between two nations with so few cultural differences. Why are Canadian Internet users 59% more likely to have a broadband account? How much has to do with the percentage of Canadian homes that can have broadband connections, price, marketing differences, regulatory policies?

In other words, what can the US learn from Canada about how to increase our use of broadband Internet connections?

Discouraging news about Google Content Targeted Ads on general media sites

Advertising may not be sufficient to support Internet media.

MarketingSherpa has an important study of marketers’ discouraging experience with Google Content Targeted Advertising on general content sites. [Thanks, MarketingFix]

Generally newsy, how-to, and highly targeted articles on niche sites tend to get far better ad clicks than newsgroups, bulletin boards, general interest sites, or stagnant info pages.

Unfortunately Google didn’t take this factor into consideration when designing the program. They chose the partner sites for contextual ads mainly based on traffic (sites had to have more than 20-million pageviews a month, which very few niche sites do) and “quality” which seems to mean being G-rated.

What they found is that click rates are abysmal for many contextual ads, and that conversion rates (share of clickers who take the desired action after clicking on the ad) have been disappointing for many advertisers as well.

MarketingSherpa says low click rates aren’t too big a deal if you’re paying by the click and you’re getting decent conversions. True enough, but it also means that pay-per-click ads aren’t going to pay the bills for an online publisher.

The low conversion rates are even more troubling. This may doom general content sites to seeking price-sensitive, rich-media-laden, dubiously-effective branding ads instead of light, direct-response advertising that is the fastest-growing category on the net. According to the NY Times, search-related advertising has grown “from an estimated $400 million in 2000 to $1 billion in 2002 and even higher this year”.

If this admittedly limited research holds true, what are the implications for online publishers?

First, don’t assume this means you should charge for content. Just because it’s still challenging to sell ads on general content, that doesn’t mean you can sell it to your readers.

Second, seek services revenue. The services sector is producing more revenue and growing faster than general content.

Third, consider publishing content that supports direct marketing. Get your readers when they’re considering a purchase. For local newspapers, real estate comes to mind.

Online advertising may be bottoming out

While 2002 Internet ad revenue was down a whopping 17% from 2001, the fourth quarter was down only 10% from the fourth quarter of 2001, and it was up 2% from the third quarter of last year. This is the first quarterly increase since the second quarter of 2000. This information is from the Internet Advertising Bureau / PriceWaterhouseCoopers advertising estimate for the last quarter of 2002.

Remember, ad numbers that are more than a couple of years old contain a lot of junk, including the tail-ends of some awful long-term deals and hundreds of millions of dollars in phony advertising that AOL has since written off. Under the circumstances, this quarterly increase is very encouraging and may mean that Internet advertising has hit bottom and will grow again on an annual basis when the ad market as a whole recovers.

The IAB release mentions in passing (1) 15 online publishers are getting 80% of the revenue, and (2) “the majority of online publishers are profitable, and their revenues continue to rise year-over-year”.