The Internet Economy in Canada

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The Internet Economy in Canada
DRAFT AS OF SEPTEMBER 23, 2008

• Richard Simpson
• Electronic Commerce Branch
• Digital Ontario Conference
• October 3, 2008

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The Growth of the Internet Economy
Everything we ever said about the Internet is
happening Andrew S. Grove, Intel Corporation
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The past decade
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What has changed since 1998?
In Millions


Source International Telecommunications Union
ICT Statistics Database Source 1998 IDC, Active
Media and Forrester Predicted IT by 2003 Source
2008 IDC, Worldwide Internet Usage and Commerce
2005-2009 Forecast update, April 2007
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The Global Internet Economy
Worldwide E-Commerce Sales

• Worldwide e-commerce spending projected to grow
  at CAGR of 23, exceeding 8.75 trillion in 2009
• The growth of B2B spending is comparably strong
  at CAGR of 22, amounting to 7.6 trillion by
  2009

Source IDC, Worldwide Internet Usage and
Commerce 2005-2009 Forecast update, April 2007
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Global connectivity is the foundation
Source OECD, ICT database and Eurostat,
Community Survey on ICT usage in households and
by individuals, January 2008
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Canada has generally kept pace
of enterprises
Source Statistics Canada, Survey of Electronic
Commerce and Technology, 2000-2007
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And high speed is now the norm
Source Statistics Canada, Survey of Electronic
Commerce and Technology, 2000-2006
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Wireless popularity is increasing

• Over three-quarters (77) of private sector firms
  reported using wireless communications in 2007,
  up from 51 seven years earlier.
• ICTs commonly used in the private sector include
  Internet and e-mail. About 87 of firms used
  Internet in 2007, while 81 used e-mail.

Source Statistics Canada. The Daily, April 24,
2008
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Convergence is making the Internet more
accessible

• Convergence is blurring the boundaries between
  different forms of digital ICTs
• The share of those sending emails or browsing the
  Internet has steadily increased up to about 30
  of all mobile users
• Over 50 of mobile users in OECD countries had a
  multimedia phone in 2005

Source OECD. Compiled from Mobinet Index, OECD
Communications Outlook 2007
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And individuals are buying more online
Source OECD, ICT database and Eurostat,
Community Survey on ICT usage in households and
by individuals, January 2008
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And what they are buying is changing

• Clothing, accessories and shoes now account for a
  large part of online sales
• Even groceries are ranked amongst products
  purchased by online buyers worldwide at 14

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Despite this, the amount of firms selling online
remains low

• In most OECD countries, e-commerce still
  represents a small share of total sales
• In 2006, e-commerce was above 15 of total
  turnover only in Korea, Denmark, the United
  Kingdom, France and Ireland
• In 2007, private sector online sales in Canada
  accounted for just under 2 of total operation
  revenue

Source OECD, ICT database and Eurostat,
Community Survey on ICT usage in households and
by individuals, April 2007
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Canada has started to capture part of this growth
CDN (in billions)
Source Statistics Canada, Survey of Electronic
Commerce and Technology, 2000-2007
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B2B vs B2C
Source Statistics Canada, Survey of Electronic
Commerce and Technology, 2000-2006
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With Firms Purchasing Online
of enterprises
Source Statistics Canada, Survey of Electronic
Commerce and Technology, 2000-2007
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As well as consumers
but sales are concentrated
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The Internet is now the more popular advertising
medium

• Advertising expenditures on the Internet have
  been growing faster than on any other medium
• In 2007, Internet advertising accounted for 7 of
  global advertising expenditure
• The Internet already attracts more than 10 of
  advertising expenditures in Norway, Sweden and
  the United Kingdom

Source Zenith Optimedia, 2008
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All of this has created a new e-economy

• The mainstreaming of electronic commerce has
  created an e-economy in which the Internet and
  supporting ICTs are the central infrastructure
• Electronic commerce and e-business are now used
  across virtually all sectors of the economy
• E-business applications have become the primary
  tool for the transformation of business processes
  and marketplace innovation
• Digital products and services
• E-logistics and supply chains
• E-payments and online banking
• Online shopping
• Online procurement

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A primary driver for innovation

• The Internet is
• a universal platform for communication,
  collaboration, innovation, creativity and
  economic opportunity
• a catalyst for closer integration of the global
  economy
• an engine for research and innovation
• fostering new types of market-based
  entrepreneurship
• allowing people outside the boundaries of
  traditional institutions to join groups that
  collaborate in the production of content,
  services and goods

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Internet and ICT firms lead in innovation
The Worlds Top 14 Most Innovative Companies

• Apple
• Google
• Toyota
• GE
• Microsoft
• Tata group
• Nintendo

• Proctor Gamble
• Sony
• Nokia
• Amazon
• IBM
• RIM
• BMW

Source BUSINESSWEEK Magazine, The Worlds 50
Most Innovative Companies, April 28, 2008
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Current Challenges
We are living in the age of Web 2.0 and 63 of
Canadas businesses havent yet wrapped their
heads around Web 1.0 David Johnston,
President, University of Waterloo Keynote
address to the 2008 Telecom Summit
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Canadas lead has vanished
Major international benchmarking studies have
shown a sharp drop in our ranking for business
use of ICTs.
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Weaknesses in Canadas performance as an e-economy

• Canadian businesses are not using connectivity
  effectively to enhance competitiveness
• Despite proven benefits of using electronic
  commerce and other Internet business solutions,
  Canadian SMEs and key sectors of the economy have
  lagged in adoption
• Net Impact Studies
• Canadian businesses that adopt Internet Business
  Solutions (IBS) can realize financial benefits
  that include increasing revenues and reducing
  costs, which can lead to profit increases of as
  much as 150 (Net Impact Study Canada The SME
  Experience, November 2002)
• Canadian businesses were less likely than their
  U.S. or European counterparts to buy and sell
  over the Internet, even though connection rates
  were similar. (Net Impact Study Canada, May 2003)
• Survey of Electronic Commerce Technology
  (SECT)
• 61 of online sales comes from only four sectors
  of the economy (SECT 2006)
• 1 barrier to Canadian business adopting
  e-commerce is Goods and services do not lend
  themselves to Internet transactions (SECT 2006)
• Canadian online sales exports have been declining
  since 2002

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Persistent barriers to adoption
Source Statistics Canada, Survey of Electronic
Commerce and Technology, 2000-2006
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Business less likely to sell online

• In 2007 an estimated 82 of public sector
  organizations made purchases online, compared
  with 16 who reported online sales.

• Firms remained more likely in 2007 to purchase
  than to sell online with just under one-half
  (48) purchasing compared with only 8 selling.

Source Statistics Canada. The Daily, April 24,
2008. http//www.statcan.ca/Daily/English/080424/
d080424a.htm
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Sales are concentrated in four sectors
Four sectors account for 58 of all e-commerce
sales in Canada
Source Statistics Canada, Survey of Electronic
Commerce and Technology, 2000-2007
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Small business is a particular challenge

• Given that 99 of Canadian businesses are SMEs,
  slow adoption of these technologies retards
  efforts to modernize business supply chains,
  reducing the competitiveness of major industries
• Barriers to SME adoption are not easily addressed
  by one size fits all approaches

Source Statistics Canada, Survey of Electronic
Commerce and Technology, 2006 , The Daily, April
20, 2007
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The Future of the Internet Economy
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The Future of the Internet Economy

• In June over 2000 people from 68 countries
  assembled in Seoul, Korea at the OECD Ministerial
  on the Future of the Internet Economy
• Since the last Ministerial in 1998, the Internet
  is increasingly critical to our economies and
  societies with implications across many policy
  domains

• The Internet economy is profoundly affecting
  everyday lives and transforming economic, social
  and cultural opportunities worldwide
• The Seoul Declaration was adopted by the 30 OECD
  countries and
• 9 non-member ones

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The Seoul Declaration Policy Framework

• WE DECLARE that, to contribute to the development
  of the Internet Economy, we will
• Facilitate the convergence of digital networks,
  devices, applications and services
• Foster creativity in the development, use and
  application of the Internet
• Strengthen confidence and security
• Ensure that the Internet Economy is truly global
• Recommendations and principles were endorsed in
  the areas of next generation networks, RFID,
  public sector information, digital content,
  critical infrastructures, online identity theft,
  consumers

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Canada Roundtable on the Future of the Internet
Economy

• In October 2007, during OECD Week in Ottawa,
  Industry Canada and the Canadian Chamber of
  Commerce hosted a Canada Roundtable on the Future
  of the Internet Economy, and some 75 Canadian
  business and civil society leaders participated
• Canadian stakeholders told us that the
  fundamental goals for Canada are
• Performance regain Canadas leadership Internet
  economy position (for productivity, innovation,
  competitiveness)
• Policy get the environment right for investment
  and innovation
• Partnership strengthen creative policy
  cooperation between government and the private
  sector (innovative governance, with strong
  federal government leadership)

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Identify and Remove Barriers to e-Business
Goal A strategy to promote the use of the
Internet as a necessary tool for business, and
for ensuring Canadas overall competitiveness,
innovation and economic growth. The internet,
innovation and economic growth Perrin Beatty,
CEO Canadian Chamber of Commerce and David
Johnston, President University of Waterloo The
Hill Times, June 23, 2008

• Action
• Minimize and remove systematic and sectoral
  barriers to the conduct of online commerce in
  partnership with the private sector
• Reconvene the Roundtable on the Future of the
  Internet Economy
• An agenda for a Digital Canada
• e-Economy measurement and benchmarking
• Refine the SECT survey, and secure long-term
  funding
• Resume Canadas e-Report Card

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