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The Internet Economy in Canada

DRAFT AS OF SEPTEMBER 23, 2008. The Internet Economy in Canada. Richard Simpson Electronic Commerce Branch Digital Ontario Conference October 3, 2008. 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 Internet Economy in Canada

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  1. DRAFT AS OF SEPTEMBER 23, 2008 The Internet Economy in Canada Richard Simpson Electronic Commerce Branch Digital Ontario Conference October 3, 2008

  2. The Growth of the Internet Economy “Everything we ever said about the Internet is happening” Andrew S. Grove, Intel Corporation

  3. The past decade

  4. $7.6 Trillion (2007) (2007) (2005) 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

  5. 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

  6. Global connectivity is the foundation Source: OECD, ICT database and Eurostat, Community Survey on ICT usage in households and by individuals, January 2008

  7. Canada has generally kept pace % of enterprises Source: Statistics Canada, Survey of Electronic Commerce and Technology, 2000-2007

  8. And high speed is now the norm Source: Statistics Canada, Survey of Electronic Commerce and Technology, 2000-2006

  9. 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

  10. 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

  11. And individuals are buying more online Source: OECD, ICT database and Eurostat, Community Survey on ICT usage in households and by individuals, January 2008

  12. 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%

  13. 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

  14. Canada has started to capture part of this growth CDN (in billions) Source: Statistics Canada, Survey of Electronic Commerce and Technology, 2000-2007

  15. $58,235 $46,492 $32,837 62.3% 37.7% $26,438 72.7% 27.3% 71.4% 28.6% $18,164 74.8% 25.2% $10,815 $6337 67.7% 32.3% $5550 75.4% 24.6% 72.7% 27.3% 76.9% 23.1% B2B vs B2C Source: Statistics Canada, Survey of Electronic Commerce and Technology, 2000-2006

  16. With Firms Purchasing Online % of enterprises Source: Statistics Canada, Survey of Electronic Commerce and Technology, 2000-2007

  17. As well as consumers but sales are concentrated

  18. 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

  19. 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

  20. 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

  21. Apple Google Toyota GE Microsoft Tata group Nintendo Proctor & Gamble Sony Nokia Amazon IBM RIM BMW Internet and ICT firms lead in innovation The World’s Top 14 Most Innovative Companies Source: BUSINESSWEEK Magazine, The World’s 50 Most Innovative Companies, April 28, 2008

  22. Current Challenges “We are living in the age of Web 2.0 and 63% of Canada’s businesses haven’t yet wrapped their heads around Web 1.0” David Johnston, President, University of Waterloo Keynote address to the 2008 Telecom Summit

  23. Canada’s lead has vanished Major international benchmarking studies have shown a sharp drop in our ranking for business use of ICTs.

  24. Weaknesses in Canada’s 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

  25. Persistent barriers to adoption Source: Statistics Canada, Survey of Electronic Commerce and Technology, 2000-2006

  26. Business less likely to sell online • Firms remained more likely in 2007 to purchase than to sell online with just under one-half (48%) purchasing compared with only 8% selling. • In 2007 an estimated 82% of public sector organizations made purchases online, compared with 16% who reported online sales. Source: Statistics Canada. The Daily, April 24, 2008. http://www.statcan.ca/Daily/English/080424/d080424a.htm

  27. 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

  28. 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

  29. The Future of the Internet Economy

  30. 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

  31. 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

  32. 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 Canada’s 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)

  33. 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 Canada’s 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 Canada’s ‘e-Report Card’

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