Asian e-commerce holds great growth potential

Asian Internet use is rising rapidly, and China and India offer the greatest short- to medium-growth potential in the world. The immediate beneficiaries of this trend will be Internet servers and manufacturers of personal computers, but rapid growth of e-commerce in the region will reshape consumption patterns for certain products and services.

According to a report entitled "Asia-Pacific Online" released by the research firm eMarketer, the number of Internet users in China nearly doubled in 2003 to reach 114 million people. Chinese oInternautso should number 250 million by late 2005.

Manufacturers and marketing companies are increasingly shifting their attention toward Web sites and e-publications as venues for reaching Asian customers. That, in turn, is contributing to dynamic growth of the online publishing industry.

The Online Publishers Association reported that third quarter growth in advertising revenues rose by over 45 percent year-on-year. The preponderance of publications under the AssociationAEs umbrella are in English, but the language mix will change as the number of titles in Chinese, Japanese, and Korean come on strong this year and next.

The shift toward seeking news and other current information via television and the Internet will cause a gradual shift away from traditional print publications in AsiaAEs leading urban centers.
However, widespread use of the Internet as a news source continues to be inhibited by the lack of broadband access in leading Asian markets. Companies offering broadband services and equipment for servers should experience sales growth in excess of 20 percent during 2004 and 2005.

It appears that the broadband barrier will be surmounted over the next few years as Asian nations like Taiwan and South Korea scramble to put the corresponding infrastructure into place. By the end of this year, over 90 percent of South Korean Internet users will have broadband
connections. Progress in that area will be slower in China and India, where broadband access will primarily be limited to major metropolitan areas for several more years.

From a demographic perspective, China and India, account for over 37 percent of the worldAEs population. In both nations, the highest rate of Internet use is found among teens and young adults. Those age groups are particularly tuned into electronic gaming, and that will contribute
to healthy revenue gains for game-related Web sites in 2004 and 2005.

The worldwide subscription income for online gaming sites was valued at over US$600 million in 2003. Korea and Taiwan are the leading markets. The former accounted for a disproportionately high market share of over 50 percent, but other Asian nations are coming on strong. Overall Asian gaming revenues should grow in excess of 15 percent per annum this year and next.

Asian service companies will be among the greatest beneficiaries of growth in e-commerce over the next few years. Consumers in leading Asian consumer markets are only beginning to grow accustomed to booking air travel, car rentals, and hotels via the Internet, but double digit sales growth in those sectors will be noted this year.

Motion picture companies will benefit as viewers purchase videos and movie theater tickets via the Internet. Due to their compact size and ease of shipment, DVD sales should come on strong, but theater ticket sales will also see healthy gains.