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Monday, 6 December, 1999, 13:49 GMT
America's E-Christmas boom
santa shopping Will internet commerce dominate Christmas?


By BBC News Online's Kevin Anderson in Washington

E-commerce was the newcomer last holiday shopping season, but this year internet firms are hoping it will be the first "dot com" Christmas.

Internet shopping sites are pouring millions of dollars into make-or-break advertising campaigns in the hope of winning a chunk of some of the $4bn that Forrester Research estimates cyber-shoppers are expected to spend this holiday season.

The Christmas crush

Online shoppers got off to a good start. Traffic to online toy shops, cyber-malls and electronics stores surged 30% between 24 and 28 November, according to Nielsen NetRatings.

Shopping sites are seeing the benefits of an unprecedented advertising blitz.

Internet companies nearly tripled their spending on advertising in conventional media, to nearly $755m, in the first half of 1999 compared with the year before, according to Competitive Media Reporting, a New York-based research firm.

"Last year, e-commerce really hadn't hit," said David L Smith of Mediasmith, a San Francisco advertising agency whose clients include such high-tech players including CBS MarketWatch, Liquid Audio, VeriSign and ShoppingList.com.

shopping mall Can the web lure people from the shopping mall?
The relatively few e-commerce players had high profiles by virtue of being the first in the market.

With more dot com companies fighting for consumers' cash, many bigger e-commerce sites have increased their annual advertising budgets from $5-7m each last year to $30-50m this year, Mr Smith said.

They are often bankrolling the advertising campaigns with a second round of venture capital funding. No sale

Some sites have been victims of their own success.

Hoards of online shoppers will clog the internet, causing performance to degrade on the system as a whole, and individual sites are struggling to cope with the crush, said Allen Weiner, vice president of analytical services at NetRatings.

With such spikes in traffic, "we are getting into uncharted territory," Mr Weiner said.

Presentsdirect website Christmas presents on the net
"No one knows what kind of capacity is really needed, but many companies underplanned."

Shoppers rushed to online toy merchants hoping to snatch up hard to find gifts such as the wildly popular Pokemon toys.

During the US Thanksgiving holiday weekend at the end of November, traffic at toy sites increased 85%, according to NetRatings. Some sites such as ToysRus.com and KBToys.com have suffered slowdowns.

Mr Wiener said that companies were foolishly caught flat-footed after their marketing blitz.

"I can't believe the companies have spent mega-dollars for advertising and then were not prepared on their sites. What's going on here? It's a major disconnect," he said.

Slow download times could mean lost sales. Zona Research estimates that more than $4.35bn in e-commerce sales are at risk due solely to unacceptable download times.

Make or break season

Opportunity is driving the advertising blitz, Mr Smith said.

There are billions of dollars to be made, and companies that successfully bring an e-concept to market first, such as portal Yahoo and Amazon, establish a barrier to entry for those who come later, he said.

But some companies are betting their existence on a successful holiday shopping season.

Not all companies will survive to see the promise of profits. "I think a lot of companies are going to go out of business" after the holiday season, Mr Wiener said.

But after the dust settles, even with some business failures, it will not slow the seemingly unstoppable internet economy, he said.

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See also:
06 Dec 99 |  Business
UK internet shopping set to boom
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