Japan’s Internet Dominance Fading in Asia

China and India will outpace Japan in Internet growth in the near future, according to a report by eMarketer.

The eAsia report found that China’s active Internet user base will grow from 2.5 million in 1999, to 21 million by 2003, an increase of 750 percent. India’s active Internet use will reach 9 million in 2003, from just 270,000 in 1999.

During the same period, Japan, the nation that currently dominates the Asian Internet, will see its Internet base increase from 10.3 million in 1999 to 31 million by 2003. But Japan’s percentage as Asia’s leading Internet market will decrease from 48 percent to 32 percent over the same period.

While representing more than 50 percent of the global population, Asia represents only 16.6 percent of the world’s Internet users. This percentage will increase significantly over the next several years, according to the report. By year-end 2000, active adult Internet users in Asia will number 38 million, and by 2003, this figure will grow to 95.83 million online users, or 25.7 percent of the world’s total.

A great disparity exists in Internet penetration rates throughout Asia. Approximately one half of Asian countries have penetration rates of less than 3 percent, while Singapore and Australia boast rates of 39.9 percent and 19.2 percent, respectively. Men represent 78 percent of all users in Asia, while women account for 22 percent. These figures differ greatly from those in the United States, where males represent the remaining 49 percent.

The report also notes that Asia’s e-commerce growth will increase to $88 billion from $6.6 billion at year-end 1999, being driven by the Asian economic recovery and acceptance of the Internet as a viable business alternative. Business-to-business (B2B) e-commerce will command the majority of total e-commerce revenues generated in Asia. In 1999, 77 percent ($5.09 billion) of the $6.63 billion in e-commerce revenues were B2B transactions. B2B will represent 87 percent ($76.56 billion) of the $88 billion in e-commerce by 2003.

E-commerce revenues in South Korea reached $351.4 million in 1999, a dramatic increase from $88 million in 1998. By the end of 2000, e-commerce in Korea will surpass $1 billion. Online banking epitomizes the acceptance of the Internet in Korea. After only one month of full operation, online securities transactions generated $47 billion in revenues, or 29 percent of the country’s total stock transactions, valued at $162 billion.

“While much of the Internet growth seen in China and India is due to the sheer sizes of these countries, going forward, it will be alternative forms of Internet access, such as cable modem and wireless access which could drive these countries to the forefront of the Internet marketplace,” said Brian Gilman, senior research analyst at eMarketer. “Today, areas of China and India are not properly wired for traditional phone access. These countries boast two of the largest cellular phone and cable television markets in the world and that alone may allow them to become the next Asian Internet powerhouses.”

eMarketer’s report also reveals how online advertising revenues in Asia are increasing steadily. Asia will soon equal the US in online advertising spending as a percentage of total advertising. In 1999, the Asia-Pacific region spent $230 million dollars in online advertising, or 5.3 percent of the worldwide total. By 2003, this number will increase to $2.61 billion, or 10 percent of the worldwide totals.

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