Bowdon Media - Whitepaper

E-Commerce and the VFR Revolution: Trends Converge

At first, Internet shopping made us nervous.

And we took a while to get over it.

Back in 1998 a Business Week/Harris poll showed that 80% of users were "very" or "somewhat" concerned with using a credit card to make an online purchase.

Even by 2001, a Market Facts Interactive survey showed that only a slight majority of Internet users, 57%, were comfortable giving out their credit card numbers online.

The psychological shift didn't take place until 2002-2004. And Online Retail sales have been off to the races ever since.

You only have to go as far as the U.S. Commerce Department website, which releases E-Commerce statistics every quarter. The 3Q 2006 figures show annual growth in E-Commerce sales at over 20% for the last two years, about triple the growth rate of retail in general.

Year/Year Growth	U.S. E-Commerce Retail Sales Growth	U.S. Overall Retail Sales Growth
3Q 2006	20.9%	5.1%
3Q 2005	26.2%	8.3%

Source: U.S. Commerce Department, Census Bureau

And the trend isn’t predicted to be finished anytime soon. A recent survey of more than 200 web merchants by Internet Retailer showed that 47% expect their web sales to grow by at least 30% in 2006. "Web merchants are very bullish about this year," said Mark Brohan, director of research, Internet Retailer.

But there’s another piece to the story.

During this period time, something else happened: Broadband to the Home

Cable modem and DSL providers weren’t exactly waiting for customers to get comfortable entering credit card numbers before marketing their services. It just happened that way.

And boy, has it happened in a hurry. This growth is nothing short of extraordinary.

Broadband Penetration

A recent study by Pew Internet showed that for the 12-month period ending in March, 2006, home broadband users grew by 40%.

This means that as of March, 2006, a total of 42% of Americans enjoyed high-speed internet access at home, compared to just 30% in March, 2005.

And there are other interesting demographic components.

Among “Active Internet Users,” whom we can presume are the most likely to purchase online, 72% receive high-speed access at home as of May 2006, according to the June 2006 Bandwidth Report, published by WebSiteOptimization.com.

Another question: Is Broadband also most likely at homes with the most disposable income?

It’s only common sense, and it happens to be true. In a survey of 1,600 homes released May, 2006, the Leichtman Research Group found that 64% of households earning over $75,000/year have broadband internet access, versus only 39% in households earning $30,000-$75,000.

Bandwidth by Income	Households Earning $30,000-$75,000	Households Earning Over $75,000
Broadband Penetration (May, 2006)	39%	64%

Source: Leichtman Research Group

So these two groups, active internet users and higher income consumers -- both of which are more likely to shop online -- well, the data shows they are also both more likely to have high-speed internet access which can easily play video.

And there's even hope for those that don't yet have broadband. The Leichtman survey also showed 40% of current narrowband/dial-up subscribers are interested in getting broadband.

Mouse Money

So the stage for Internet Videostreams for Retail, (VFRs), has been set by two disconnected, but simultaneous trends: Consumer Comfort Levels with Online Shopping & Broadband to the Home.

As in any period of change, the companies who can best anticipate the future, and harness its opportunities will win.

Quite simply, video makes customers feel better informed about their potential online purchases, and when they feel better, they buy more.