Top Ten E-Business Trends for 2005

eMarketer’s team of analysts and researchers give their predictions of what to look out for in 2005 in the Internet, e-business and emerging tech arena.

January 05, 2005

  1. Alternative Advertising: While paid search will continue to dominate online advertising in 2005, the growing fear of digital video recorders (DVRs) stealing eyeballs from TV commercials will increasingly impel brand marketers to devote more of their budgets to “alternative” vehicles. Senior Analyst David Hallerman explains that for some of these traditional companies, that alternative will simply mean more online advertising � eMarketer expects over 27% spending growth for rich media advertising and 21% for overall online ad spending in 2005. In addition, marketers will increasingly incorporate the Internet into word-of-mouth campaigns, making the referral buzz more effective than it has been offline only.

  2. RSS: RSS will grow as a pervasive form of content syndication. Supporting the idea of alternative advertising, eMarketer Director of Research Yael Marmon says we should expect to see advertisers attempting to leverage RSS as a platform for targeted advertising. Indeed, the RSS feature in Mozilla’s new Firefox Web browser (which should eat away at the lion share Microsoft’s IE has on the browser market in 2005) is one of the reasons the new browser has experienced such rapid adoption recently.

  3. AOL Changes: AOL has lost 4 million subscribers in the last 2 years. It’s dial-up business is stagnating as Internet users migrate to broadband. In 2004, online advertising revenue made up approximately 11% of AOL’s total revenue. By the end of 2005, AOL will be hoping that online advertising revenue will make up close to 20% of its total revenue (it plans to open its doors to non-subscribers) as its access business continues to decline.

  4. On-Demand TV: Consumers are taking more control of their TV experience. “DVRs on their own will not change the TV landscape,” says Senior Analyst Ben Macklin, “but combine the power of time-shifted viewing and ad skipping with the increasing availability of video-on-demand and broadband entertainment, and we should begin to see changes in the landscape.” Advertisers need to embrace the new environment in order to find and target their audiences.

  5. Wireless Broadband: Look for more wireless broadband in 2005, as well as more consolidation among operators, particularly throughout the Americas. TV is also coming to wireless handsets, in the form of clips and even streaming video. Senior Analyst Noah Elkin warns, “Don’t expect consumers to throw out those 42-inch plasma sets in favor of tuning into ‘The Apprentice’ on their cellphones, but operators will push this sort of value-added service nonetheless, hoping to drive up consumers’ monthly bills.” This year, wireless broadband will begin to challenge operators’ high-speed 3G.

  6. Radio Frequency Identification (RFID): Wal Mart’s deadline is January 2005 for it’s top suppliers to start sending RFID-tagged goods to its warehouse in Dallas. IDC estimates US retailers and their suppliers spent roughly $90 million in 2003 on RFID, and AMR Research estimates consumer goods companies, many of which supply retail giant Wal-Mart, spent $250 million on RFID tags in 2004.

    eMarketer predicts adoption by the retail sector will continue in 2005, as part of a long term trend. Reports put Wal-Mart’s RFID spending alone at $3 billion over the next several years.

  7. Voice-over Internet Protocol (VoIP): Though growth in the number of VoIP users was slow in 2004, eMarketer Senior Analyst Steve Butler says it should pick up significantly in 2005. Awareness among businesses and consumers grew in 2004, as telecom and cable providers rolled out their VoIP offerings.

  8. Linux: In 2005, eMarketer expects Linux adoption in the enterprise to continue, especially as part of the server upgrade cycle. IDC recently projected that the Linux marketplace, including servers, PCs and packaged software, would rise by a compound annual growth rate (CAGR) of 26% between 2003 and 2008.

  9. Cross-Channel Retail: Retailers will think of their online stores less as unique, standalone channels by increasing their efforts to integrate inventory management fufillment activities and marketing across all sales channels � stores, Web sites and catalogs. They will also spend more time studying the behavior of cross-channel shoppers in order to create incentives that keep these shoppers from browsing in their online/offline stores but then making their actual purchase with a competitor.

  10. IT Security: Security has been one of the top three IT priorities among businesses for the past 3 years, as Morgan Stanley reported in 2003 that security was the top network spending priority among US CIOs for 2004. eMarketer expects this trend to continue in 2005.

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