Behind the News
Analysis of Industry Events
No Agreement on Internet Statistics
One indication that the Internet has truly gone commercial is that the company
that became famous for measuring television viewership--ACNielsen Co.--is
now responsible for one of the most controversial surveys of Internet use.
Reactions to that study indicate that getting a handle on who's using the
Net will prove a bit trickier than finding out who's watching "Friends."
The results of the survey, performed a year ago by Nielsen Media Research
of New York City--a unit of Dun & Bradstreet-owned ACNielsen--and paid
for by CommerceNet of Menlo Park, CA, had no sooner been released than the
authors began catching flack from one of the survey's own instigators, Donna
Hoffman, an associate professor of management at Vanderbilt University in
Nashville, TN. Essentially, Hoffman said Nielsen had misinterpreted the
raw survey data, failing to weight it correctly for the U.S. population
as a whole, and consequently the numbers Nielsen reported were too high.
The Nielsen/CommerceNet study also conflicted with a survey done at about
the same time by O'Reilly & Associates, the Sebastopol, CA-based publishing
company. O'Reilly announced that there were 5.8 million U.S. users with
direct Internet access, while Nielsen reported 37 million in the U.S. and
Canada who had some kind of Internet access. Hoffman, applying U.S. census
demographic data, said Nielsen's figure should have been 28.8 million. Since
O'Reilly used a restrictive Internet definition, its numbers could be expected
to be much lower. But the controversy illustrates the difficulty involved
in any enumeration of Internet users or even in defining the Internet itself.
Spinning Raw Data
At Vanderbilt, Hoffman codirects Project 2000, a research program studying
business uses of the Internet and other emerging media. CommerceNet is a
consortium, partially funded by the federal government, of 130 companies
interested in furthering Internet commerce. At a time when most estimates
of Internet use were based on studies from inside the computer industry
and conducted using the Internet itself, a five-person CommerceNet team
including Hoffman selected Nielsen for the 1995 survey, which was to be
non-proprietary and use traditional telephone polling techniques. Nielsen
employed random digit dialing to poll 4,200 persons in August 1995.
Under a previous agreement, Hoffman claimed the right to see and analyze
Nielsen's raw survey data. But soon after the results were announced, Hoffman
began questioning the figures and saying that she couldn't get the information
she needed from Nielsen. Eventually, she received the survey data and reanalyzed
it. "We had a lot of questions about the methodology, and Nielsen was
not very responsive. To this day some of them remain unanswered," Hoffman
says. "We began to suspect that the problem was in the representativeness
of the sample, and as it turned out, it was."
Essentially, Hoffman says Nielsen's sample overrepresents demographic groups
more likely to use the Internet, such as those with college degrees, and
underrepresents groups less likely to use the Internet, such as men and
women over 55 with less than a high school education. In addition, Nielsen
did not check for consistency of responses, she says. After reweighting
the raw data, Hoffman came up with figures about one-third less than those
Nielsen reported, namely: 28.8 million with Internet access (vs. 37 million
reported by Nielsen); 16.4 million who had recently accessed the Internet
(vs. Nielsen's 24 million); 11.5 million with access to the World Wide Web
(vs. Nielsen's 18 million); and 1.5 million who had ever used the Web to
purchase something (vs. Nielsen's 2.5 million).
A Nielsen spokesperson, speaking to the New York Times, defended
the survey as containing better data than had ever been gathered before.
Since Hoffman's criticism, Nielsen has applied its own weights--based on
age, sex and region--to the raw survey data and is producing revised numbers,
which will be announced in a few weeks, according to Asim Abdullah, executive
director of CommerceNet. However, the difference between those and the original
Nielsen numbers won't be as significant as Hoffman reported, Abdullah predicts.
Nielsen feels that applying weights for education and profession is too
difficult, because it is hard to collect that data accurately. "The
controversy is about weighting techniques, not about the health of the Internet
or the potential of that marketplace," he says. "Our members are
interested in getting a quick sense of where the market is today and how
fast it's growing. Nobody is arguing with those facts."
O'Reilly's survey, conducted by its own online research group, also used
random digit dialing and conducted interviews with 29,901 individuals. Unlike
Nielsen, O'Reilly rigidly defined an Internet user as a U.S. resident over
18 (Nielsen used age 16) who has direct access to the Internet and uses
e-mail as well as one or more other Internet tools, such as a Web browser,
FTP, Gopher or Telnet. O'Reilly excluded those connected to the Internet
only through a commercial online service such as America Online or CompuServe,
since those users do not have direct access to all the Internet's resources.
With subscribers to online services added, O'Reilly said there would be
9.7 million Internet users. In addition, O'Reilly projected that 15.7 million
would have either direct access or an online subscription by sometime in
For some observers, it's the lack of a universal definition of Internet
and Internet user that overhangs all such surveys and tends to prevent
meaningful comparisons. One source of Internet data who has studied such
definitions is John S. Quarterman, president and editor of Matrix Information
& Directory Services (MIDS)--a newsletter on Internet use
and statistics--and a senior technical partner of Texas Internet Consulting
in Austin, TX. Quarterman sees three concentric levels of Internet structure
and use. The most inclusive is what he calls the matrix, which is
all worldwide computer systems that can exchange electronic mail. The next
largest category he calls the consumer Internet, which includes anyone
capable of accessing Internet services beyond e-mail. The most restrictive
he calls the core Internet, those capable of both sending and receiving
Internet services interactively. A 1994 MIDS survey estimated 7.8
million core Internet users, 13.5 million consumer Internet users and 16.3
million e-mail or matrix users. If users of online services and other distributed
networks were included, the matrix would have included 27.5 million users
at that time, the study says.
Quarterman also criticizes the Nielsen survey, although he reaches a conclusion
different from Hoffman's. "I thought they spent a lot of money and
missed some basic points which radically diminished the value of their results,"
he says. As a result, he believes Nielsen probably underestimated the total
number of users. Not defining Internet was a critical error, he believes.
"A lot of people say Internet when they really mean electronic
mail, which I find confusing and not terribly useful. The reason Netscape
is worth a few billion dollars is not electronic mail, it's interactive
things like the World Wide Web."
Other difficulties in surveying Internet use include the changing nature
of the technology and the rapidly changing Internet user population. Quarterman
said the technique of random digit dialing is "not a magic bullet to
solve all the problems of Internet surveying." MIDS uses the
Internet itself for conducting its surveys. Whatever technique is used,
"You're not going to get an incredibly precise picture because it's
changing so quickly," he says. "But you can approach estimates
that make sense."
That surveys of Internet use are a hard nut to crack is probably the only
thing observers agree about unanimously. "I've seen several people
try to survey Internet usage by putting a survey on the Internet, which
is ridiculous; only people that are Internet-involved will see it,"
says Steve Young, director of electronic commerce for Input, a market research
firm in Mountain View, CA.
But just asking people if they have Internet access may not work either,
says Jim Warren, a columnist for publications MicroTimes and Government
Technology. "It's like asking teenage boys if they've had sex,"
he says. "They'll say, 'Yeah, sure.' It doesn't work."
At this point in tracking the demographics of the Net, it may not be literally
true that your guess is as good as mine. But there's a grain of truth in
that old chestnut.
Top European Vendors Face Uncertainty
Prospects are dicey for the four leading European systems vendors, according
to market research analysts. Bull, ICL Fujitsu, Olivetti and Siemens-Nixdorf
(SNI) face a three-year window of opportunity to sort out problems in their
domestic markets and develop a growth model to beat back international competitors.
They also face a difficult time expanding internationally beyond the continent.
Nor are these suppliers likely to gain much protection from the emergence
of a single currency or a federal government in Europe. The only area where
analysts see these companies achieving sustained success is the IT services
business, but even on this front it will be hard for the four to build up
major market shares over time.
The European offices of both the Gartner Group and the Meta Group see big
challenges coming up for European systems suppliers. While each firm retains
a strong base within its home country and locality, the Gang of Four probably
has a maximum of three years of security left from their installed bases,
according to Will Cappelli, European program director for services and system
management strategies with the Meta Group, based in Camberley, Surrey, U.K.
Cappelli sees enough life in the current user investments to sustain the
vendors for the immediate future, but he insists that they must reform to
meet the rapidly approaching challenges.
"Paradoxically, it is now easier for U.S. firms coming over to Europe.
U.S. companies originally made mistakes here, but they now have a much more
friendly approach to Europe, making it harder for traditional European vendors
to compete," Cappelli says. American firms are more used to dealing
with highly fragmented markets, he notes. The U.S. suppliers have also benefited
from faster rationalization of their work forces, compared to Europe where
reducing the head count has taken longer and cost more due to the Social
Chapter legislation from the European Commission, which protects worker
rights. In general, U.S. vendors more readily take a global view of markets
than their European counterparts have.
U.S. companies, such as Digital, EDS and IBM, also are proving successful
in grabbing substantial services business in Europe. This is not to say
that firms like Bull, ICL and Olivetti cannot compete in service provision
but rather that the competition will be fierce. In fact, Gartner Group rates
Bull as a 50 percent-plus services operation in terms of revenue. ICL also
has a strong pedigree in services, and Olivetti has an alliance in this
area with Hewlett-Packard in Europe.
On the Unix front, Cappelli sees HP and Sun Microsystems as presenting a
serious threat to the Euro vendors, because they can offer more competitive
products in terms of price and performance. IBM's AIX offerings also play
a leading part, and there is the growing popularity of Windows NT Advanced
Server to deal with. Even Germany, the bastion market for OS/2 in Europe,
is seeing a shift to NT. Unix does have a future in Europe, but it won't
be with the indigenous vendors.
Bull, headquartered in France, has the most aggressive Unix strategy among
the four vendors. The company has merged its open systems and mainframe
businesses, which Ed Thompson, a Gartner analyst based in Egham, Surrey,
sees as a sign that it is aiming at the high-end Unix sites for mainframe
replacement systems. Thompson says the company is temporarily stealing a
march over IBM in providing AIX solutions on the PowerPC platform, to which
Bull is dedicated. He says Bull will offer the 64-bit version of the PowerPC
chip architecture in the near future as well. In fact, Bull's Unix business
has grown dramatically over the last six months in Italy, Spain and the
U.K., based on its growing specialization in managing projects. Overall
the company forecasts a growth factor of three up to the year 2000, although
Thompson reckons that Bull will do well to reach 50 to 100 percent expansion.
Due to the expanded influence of Fujitsu in ICL affairs, Thompson says,
the U.K.-based company will decommit to some extent from Unix. While ICL
will manage its current user base for Sparc, it is expected to adopt the
UltraSparc chip as its next-generation architecture. The increasing branding
role played by Fujitsu is pushing ICL toward a volume products business.
The ICL identity now has most relevance to the local U.K. market, where
its original mainframe power base in local government is being eroded.
Olivetti's primary backing is for UnixWare, and the Italian company will
become a reseller of Digital's Alpha and Intel machines. SNI is shifting
its emphasis from Mips processors to Intel while concentrating on vertical
markets in the public sector, telecommunications and retail.
Neither Meta nor Gartner sees the Euro vendors making much headway in the
international IT markets. SNI in particular has to strike out, having emerged
from a period of losses and with cash to spend. The company recently opened
an operation on the U.S. East Coast and might consider further acquisitions
after buying Pyramid Technology of San Jose, CA, last year. Current Gartner
figures show that SNI has a 60 percent share of the central European market,
while Olivetti and Bull can claim 35 percent of the Italian and French IT
Cappelli of Meta Group says that ICL is an odd case when it comes to developing
an international profile, in that any expansion through acquisition would
probably be done under the Fujitsu name. Bull, which recently sold the Zenith
Data Systems PC and server business, is unlikely to buy out overseas vendors.
It is not Olivetti's strategy to acquire abroad either, according to Cappelli,
who says that more divestment is required before the Italian-owned company
can even consider such a move.
One fillip that might come the European vendors' way is the change to a
single currency, now dubbed the Euro. The problem is that the Euro may take
two to 20 years to be fully adopted, but when it is a vast amount of conversion
work will be required to retool existing systems, according to Thompson
of Gartner Group. In particular, this will be the case if two currencies
are run concurrently in various nations. The four European firms have an
opportunity here, but the trouble is no one knows when the Euro will be
introduced and how widespread its adoption will be.
A likely outcome for the European systems suppliers could be acquisition
or merger with U.S. or Far Eastern companies. This process has already started
with Fujitsu taking over ICL. Unless the remaining independent vendors in
Europe can change their fortunes, they may experience similar fates. Some
form of shakeout is bound to impact the European systems suppliers.
At least in Cappelli's view, an outbreak of protectionism by the European
government remains improbable as a source of help for the local IT firms.
He says there is no evidence that the authorities are prepared to support
moribund industry sectors. There are far more successful high-technology
sectors, such as software in the U.K. and biotechnology in France and the
U.K., which could get protectionist relief.
Hardware is becoming a commodity, and the European vendors are faced with
reselling the popular operating software platforms originating from the
U.S. They can maximize opportunities in service provision through developing
cross-platform portfolios, in particular offering outsourcing capabilities
for distributed systems and desktops, as well as systems integration, project
management and consulting. Gartner Group rates Bull's management as having
the most vision and drive, as well as having extra markets to diversify
into, such as smart card technology.
The bottom line for these vendors is that they must achieve leadership in
their own geographic marketplace if they are to survive, let alone expand
beyond the European domain. The challenge for the European IT firms is to
deal with the internationalization of the IT markets in their own backyards.