Internet Penetration: Critical Mass, Then What?

According to recent reports, Internet growth has stalled. In the U.S., the number of people online is still increasing, but very slowly. In addition, the amount of time spent with the medium has also reached a plateau.

Let’s put this into perspective. According to Jupiter Research (a Jupitermedia Corp. division), there are 77.5 million households online this year, representing 68 percent penetration. By 2010, this number is only expected to increase 6 percentage points, to 74 percent penetration. For all intents and purposes, we’re entering a maturation phase as opposed to the explosive growth seen over the past decade.

A maturing online industry is still interesting to watch as the composition and utility of the medium continue to evolve. There are two areas we should keep an eye on.

Access

This area will probably change the most over the next five years. According to Jupiter Research, 55 percent of online access is through a broadband connection this year (45 percent via dial-up). By 2010, broadband access is anticipated to rise to 78 percent, a significant jump. Today, cable modems represent the majority of broadband households (26 million vs. 16 million xDSL); Jupiter Research predicts that gap will close to nearly equal access by 2010.

With broadband access comes a host of new possibilities. More use for entertainment and recreational purposes, along with significant video consumption increases, is sure to follow the rise of broadband penetration over the next five years.

Composition

If total audience isn’t increasing dramatically, maybe some audience composition changes are worth watching. Gender, age, household income, and ethnicity are a few areas we marketers like to track, some of which will show interesting evolution.

There’s really no gender story to speak of. We closed that gender gap several years ago. More women are online than men. Penetration remains solid, 65 percent for women and 67 percent for men in 2005. By 2010, those numbers will jump to 73 percent and 74 percent respectively, according to Jupiter Research.

Age segmentation is a more interesting trend over the next few years. Starting as the smallest base, the senior age segment (65-plus) will see the greatest use increase. Numbers will grow from 11.5 million seniors online this year to just over 20 million by 2010. Kids (0-11) will be the next largest growth segment. They’ll learn at a very early age about the power and fun computers and the Internet can afford.

Household income is the clearest predictor of online adoption. In 2004, nearly 85 percent of households with incomes of $75,000 or more had Internet access, compared to only 36 percent of households with incomes under $15,000. This relative comparison won’t change dramatically. According to Jupiter Research, by 2010 98 percent of households with incomes of $75,000 or more will have Internet access, compared to only 43 percent with incomes under $15,000. Hardware and monthly access costs will likely be the inhibiting factors against the lowest income segments.

Understanding ethnic composition and use is one of the hottest marketing areas today. Many of our clients are interested in connecting with a variety of ethnic segments across multiple touch points. There’s a significant deficiency in accurate online research for the smaller ethnic segments compared to the general market. Perhaps as the populations increase, so too will sample sizes and research accuracy.

We should see significant growth among African-American, Hispanic, and Asian-American segments. From 2004 to 2010, African-American household penetration will grow from 56 percent to 64 percent, Hispanic penetration will increase from 52 to 64 percent, Asian Americans from 71 to 83 percent. When we look at individual use, however, the increases may not be as steep. Use is spread across a variety of venues, including libraries, workplaces, and universities.

Though we appear to have reached a plateau in overall Internet penetration, there will be some interesting intra-medium evolutions over the next few years. As these play themselves out, the medium will continue toward mirroring the overall population. As that happens, the online channel will continue to take its rightful place among marketers traditional media options.

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