By Marc Phillips

When I was introduced to the world of information technology, I remember being impressed with the economic models of computer chip manufacturers like Intel; double the capacity and halve the price. Or thereabouts. In the last 6 months, the Internet has revealed a new round of pricing economics that will set a new course for cyber business models. Several of these have hit in the USA and Europe so we await them to hit in the Asia Pacific rim region.

In the three months over last Christmas, Dixons, a UK electronics retailer, became UK’s leading ISP. Dixons came up with the concept of FreeServe (www.freeserve.com) and of those 1 million subscribers who joined up, over 800,000 users regularly use their account.

The dilemma faced by Dixons was how they were going to create a revenue positive Internet property - not just another product orientated website with store locations and an e-commerce application that would run at a loss for several years.

By teaming up with an ISP called Planet, owned by telcoms company Energis, Dixons offered consumers free internet access if they collected a disc over the counter at their retail stores. Dixons receive commission from Energis for volume traffic of calls and advertising from the content packed portal that it is. In that time, Dixons share price on the London Stock Exchange has increased by up to 50%.

Over in the United States, the launch of FreePC (www.freeepc.com) and their give away of over 10,000 PC’s priced at US$500 each in return for subscribers agreeing to providing personal information so advertisers can tailor ads more effectively to a willing audience has raised many eyebrows.

The word FREE has suddenly taken on a new meaning - is it the killer business model ingredient - that websites have been missing. Making free pay maybe against conventional thinking but not when there is unmet demand for Internet access and billions of dollars of advertisers vying to shore up market share in this rapidly emerging medium

For those in the online advertising business, this business model challenges online advertisers to provide the consumer more for a click through !

The other trend that Australian based online businesses should be aware of is that the traditional media companies in the United States are continuing the trend to spend big dollars on building online businesses.

Viacom is allocating meaningful soft dollars to cross-promotion by providing its music and kids’ destinations with $250 million worth of promotion over the next five years. Traditional media is slowly adding a lot more wood to the fire. Disney is scheduled to offer its recently launched Go Network $165 million worth of promotion on Disney properties also over the next five years. SportsLine USA has evolved into a $1 billion franchise through CBS’s commitment of $60 million in soft dollars two years ago. By comparison, Microsoft is allocating a paltry $18.5 million over the next six months for its own portal offering, MSN.

What is Channel 10, Channel 7 and other big media players doing?

There are many trends and more dollars in overseas markets that are advancing their online businesses. The time is right for our techno-savvy community to take up the challenge and drive the internet businesses further to ensure our competitive advantage in this high tech space is maintained.

For more information contact APT Strategies at info@aptstrategies.com.au