Internet Spending Reaches an All-Time High

Consumers are increasingly attracted to online shopping, with online spending increasing 14 percent in 2004, according to a study conducted by the Online Publishers Association (OPA) and comScore Networks. Entitled "Paid Online Content U.S. Market Spending Report," the study reveals that U.S. consumers paid an all-time annual high of $1.8 billion in 2004. OPA has conducted the study for the past three years, and over that time results have shown a continuous climb in online revenues, from $664 million in 2001 to $1.3 billion in 2002; to $1.6 billion in 2003; and to 2004's $1.8 billion. ComScore Networks used a propriety technology network to track all Web activity for its panel of 2 million active U.S. Internet users to provide insight into consumer behavior and attitudes. The technology allows the company to view browsing, including commerce transactions with dollar amounts. Despite the year-over-year growth, only 19 million (11.6 percent) Internet users purchased content online in fourth-quarter 2004. Although that number is up from the 16.4 million making similar purchases in the same period in Q4 2003, it demonstrates huge growth opportunities, according to Michael Zimbalist, OPA president. "What works is if you have valuable information you won't see in a lot of places," Zimbalist says, citing auto racing as a popular example. No matter how unique or appealing a company's product is, however, some consumers refuse to give online spending a chance. "There's a hard-core group of people who just won't make purchases online," Zimbalist says. "It's been that way since the dawn of the Internet." Additionally, he says, there is still a sense that certain products and information should be free: "You're not paying for a physical good. You're paying for a right to see content. That's not so intuitive." Today's youth are the ones most likely to give in to the idea of spending money on something intangible, Zimbalist says: "This upcoming generation is much more attuned to the virtual world [than] the physical world. Think of someone 18 years old--most of their life they've at least known about email or knew someone who had [access to] the Internet. There's been ten years' acceptance of the Internet. It's not new versus old." Spending reached an all-time high of $471.6 million in Q4 2004, driven primarily by the annual 90 percent gain in the entertainment/lifestyles category (from $217.6 million to $413.5 million), specifically online music sales and fantasy sports. The jump may in part be due to the fact that prior to this latest study only sites that used Web browsers were monitored. Many music sites use other applications. Single purchases also hit a record high, primarily due to online music sales. Entertainment is more conducive to single payments, Zimbalist says: "There are still debates going on whether the pay-by-drink model is the winner or the all you can eat for a monthly fee." Also significant this year is spending on personals/dating, which reached an all-time high of $469.5 million (up 4.4 percent from $449.5 million in 2003), registering large gains in Q3 and Q4 following first-half declines. Though this was the leading paid-content category in 2004, the OPA report shows entertainment/lifestyles is on track to surpass personals/dating as t leading paid-content category if entertainment/lifestyles continues growing at its current rate. "The Web is moving from being a pure utility into more of a medium," Zimbalist says. "It's fun, not just functional." Related articles: The Ideal Shopping Experience Retailers need to change the way they do business to retain consumers. The Young and the Rich: The New Thrifty