The Internet Pays Off

So, was it all hype? After the dotcom bubble expanded at hyper speed toward the end of the 90s, only to disappear faster than our memories of the millennium, are we now seeing genuine growth in the sector for the first time?

So-called entrepreneurs and self proclaimed Internet Gurus spent hundreds of millions of pounds of (other peoples) money building up the infrastructure that we were all told was needed to support massive impending growth. Most of us were fooled by this strange new logic that judged good business not by profits and cash generation, but by strange measures such as the number of "hits" a Website gets, or the number of "sticky eyeballs" we could capture.

Reality brought us back to Earth – not so much with a bump as with a shuddering crash. The collocation marketplace was a perfect example of this. Data centers sprang up virtually overnight all across Europe. "Build it and they will come!" was the cry... But they didn't... at least, that is, until now.

Internet hotels are starting to fill up, and collocation data centers are becoming busier. Data centers of bankrupted players, strewn across Europe’s landscape like wildebeest carcasses in a Kalahari heat wave, are being snapped up at bargain prices by banks and other such corporations.

Can it be true? Has the Internet finally grown up? If we analyze the facts, then the answer has to be "yes." We are all becoming more comfortable using the Internet and, as we do, we become more likely to actually spend money online. I have bought everything from books to TVs and washing machines to concert tickets via the Internet. Yesterday evening I bought some tulip bulbs from a Dutch gardening Website. By doing so, I hope to have saved enough time to be able to actually plant them myself this weekend!The statistics suggest I am not alone. Over the three weeks of the Christmas period last year, Internet shopping in the U.K. soared to over £2.5 billion (US$4.6 billion), representing a rise of nearly 70 percent on the year before. And it is not just individuals that are evolving, as over 54 percent of British businesses now place orders online. Our online purchasing patterns are also interesting, with online shops busiest during weekdays between noon and 5:30 p.m., suggesting it is not just when the High Street is closed that we use the Internet.

In the newly enlarged European Union, which gives any online shop a potential marketplace of 450 million people, more than 200 million are current Internet users. This has grown by over 115 percent since 2000, and this growth figure is broadly reflected across the world as a whole, with nearly 800 million Internet users in total. In the U.K. we have around 36 million regular users of the Internet, and our growth is an impressive 132 percent since 2000. But this is dwarfed by the growth rates (albeit from very low starting points) of Albania and Bosnia of over 1,100 percent each!

Of course, not all these people are purchasing online, but as the Web becomes more secure, transactions have started booming. Over £17 billion ($31.1 billion) was spent online in the U.K. last year, and statistics show that around 10 million transactions are performed each month on the Internet. Banks in the U.K. alone have registered nearly 14 million customers for their online services, and the rise in electronic banking has had a dual effect. First, it has generated cost savings, with the banks spending on average less than £30 ($54.80) per year on account maintenance for an active online user. At the same time, satisfaction levels are 20 percent higher than with non-online customers! It’s a case of “If you want something done properly… do it yourself!”

But, as with most things, there is a catch. This rise in activity has also given rise to a phenomenon called phishing, where, typically, a user receives an email that attempts to solicit sensitive data, often emblazoned with a bank’s brand and replicating its Website perfectly. This scam is on the increase due to ever more sophisticated copying techniques and lack of education about the problem amongst users.

The relentless pursuit of payment security for our online purchases, whether high-fashion clothing from Gucci or groceries from Tesco, has given rise to a plethora of new secure payment options. New companies are springing up everywhere with online payment solutions, including the likes of:

In addition, a new breed of creature has been spawned: a PSP, or Payment Service Provider. Some of the names in this burgeoning field are:

Phew! No wonder the data centers are filling up – they are housing all the new technology for secure payment companies!

— Mike Tobin, Chief Executive Officer, Redbus Interhouse plc