7/03/14

How e-commerce experts view looming threats to the Internet

Government intervention and limits on marketing are likely, they say.

Don Davis , Editor in Chief

A report released today highlights threats facing the Internet over the next decade. And e-commerce executives from around the world believe some of them could impinge on online retailing and marketing.

The report released today by the Pew Research Internet Project, part of the nonpartisan Pew Research Center based in Washington, DC, is based on a survey of 1,400 Internet specialists that asked them whether they fear there will be “significant changes for the worse and hindrances to the ways in which people get and share content online” between now and 2025. 35% said “yes” and 65% “no,” but the Pew report notes that some of those who said “no” added that this was more their hope than their prediction.

"While the majority of the survey respondents remain optimistic about the Internet's long-term future, they also have concerns about the turf wars emerging as these technologies mature," says Lee Rainie, director of the Pew Internet Project and a co-author of the report. "Many experts worry that, if ignored, these problems could change the fundamental nature of this crucial information system." The report was co-authored by Janna Anderson, director of the Imagining the Internet Center at Elon University, which collaborated with Pew on the study, which was conducted between Nov. 25, 2013, and Jan. 13, 2014.

The Internet experts surveyed focused on four potential threats to the Internet between now and 2025:

E-commerce executives contacted by Internet Retailer seem most concerned by the first and the fourth threats: that government intervention will stifle web commerce and that there may be onerous restrictions on marketing via the web emerging from attempts to protect consumer privacy and minimize spam.

“There is a high likelihood governments are going to intervene because the Internet represents a bigger slice of their tax base,” says Chicago-based e-commerce consultant Jim Okamura. “What protects us is that governments are revenue-motivated. They know they should not kill the golden goose.”

A similar comment came from Ludovino Lopes, president of the Brazilian e-commerce association, the Câmara Brasileira de Comércio Eletr┼Ćnico. “The Internet is part of the essence of the economic models of our time,” Lopes says. “The digital economy is here to stay!” The question, he says, is to what extent governments will intervene, “and that is part of our responsibility as associations, to call and join efforts for action.”

Laws affecting e-commerce vary considerably around the world, and are changing rapidly as governments struggle to keep up with the rapid evolution of the web, says Uwe Bald, vice president of international business development at Hermes, a logistics provider to online retailers and brands that is part of German direct retailing giant Otto Group, No. 2 in the Internet Retailer Europe 500.

“Privacy laws are in general much stricter in most countries in the world than in the U.S.,” Bald says. “Most countries have difficulty keeping up their legislation and enforcing their law with the rapid development of the Internet. I expect at one stage this to change and governments to get greater control.” As an example of new regulation, he points to a two-year-old European Union regulation requiring sellers of digital goods based outside of the EU to collect value-added tax, similar to sales tax in the U.S., when selling to European consumers.

Efforts to protect consumer privacy and minimize unwanted online communications will force retailers and brands to tailor messages to individual consumers, several of the e-commerce executives observed.

“Companies will have to become more efficient in managing their relationships with clients,” says David Bernardo, a Mexican e-commerce consultant and professor of e-commerce and digital marketing at the Nova School of Business and Economics in Monterrey. “This will result in companies focusing more on better quality content and content that is relevant to their relationship with their clients. Big data will play a critical role in understanding what is the right moment to give clients what they need at that exact time instead of force-feeding them without filter.”

Bald agrees. “Personalization and content-driven marketing is the key in the future,” he says.

Some of the international e-commerce experts raised other issues. For example, consumer confidence could be undermined by cyber-security attacks that result in increased payment fraud or that take down web sites, such as through distributed denial of service attacks that overwhelm web sites with traffic, says Andrew McClelland, chief operations and policy officer at IMRG, an e-commerce trade group in the United Kingdom.

“Cyber-threats relate to the broader scope of DDOS, hacking attacks and other more sophisticated activities are already impacting the retail vertical,” McClelland says. “In the U.K., retail makes up a substantial element of the nation's economic activity and is a key barometer of consumer confidence. A major attack or threat in this area could have wider implications on the economy, and whilst this is unlikely, it should absolutely be on businesses and governments agendas. Mitigation is cheaper than failure.”

Bald raises the possibility that 3-D printers will proliferate, allowing consumers to produce hard goods at home. That, he says, could lead to the kind of piracy of tangible products that is common today with software, music, TV shows and movies.

Several of the executives commented that the rapid changes in the Internet will continue to force companies to constantly adapt. Lopes, the Brazilian e-commerce association president, points to the rise and decline of Internet companies like Netscape and Yahoo Inc. in less than a decade. “Companies are not prepared to resist these changes and because of that collapse,” he says. “They need to reinvent themselves all the time.”

Bernardo, the Mexican consultant, makes a similar point. “Companies that will be able to compete in the future with the current large players will have to be extremely disruptive and gain size quickly in order to compete before they are acquired or killed,” he says.

He adds that the market value of Internet companies today is reduced by fears that government action might limit profitable online activities. As the rules become more clear in the future, he predicts, those concerns will dissipate: “Less uncertainty equals less risk.”

Topics:

e-commerce, Government, Hermes, Internet, Otto Group, Pew Research Center, regulation

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