Dr. Roland Schroeder

Phases of Internet Media (and Economy) in Germany

  1. Initial phase (starting around mid 90ies) – “You have to be on the Internet” – users expect their media to have a web site in order to be considered “modern” and innovative
  2. Hype (1998 – 2000) – big investments of media in their web platforms but no concepts of revenue building (blind trust). Spin-offs from conventional media enterprises to go public. Stock hopelessly over evaluated, building up of the so-called New Technology Bubble, development of an extra stock market section, The New Market. The Economy is split into two segments: Old Economy and New Economy. The players in the Old Economy are considered non-modern and non-innovative, but investments in New Economy mostly come from Old Economy enterprises. To open a New Economy Business almost requires no monetary security, just the business ides and a business concept, mostly planning profit after some years of investment, is sufficient. Managers receive unproportional high salaries and there seems no necessity to earn money, to show profit as business plans clearly define this phase to start years later. Money is burnt!!
  3. Breakdown (end of the year 2000 - 2002) – the bubble bursts, the New Market Section at the stock market (globally) collapses. High evaluated stock loose almost their whole value, turn into “penny stocks”. The trust into New Economy businesses and New Media hits bottom, all investments are cut down or even withdrawn totally. New business plans clearly define profit requirements. Banks and other investors could not be convinced by business plans anymore, other securities had to brought as it is usual in the so-called Old Economy. Media enterprises start to dissolve the online companies and re-integrate the online sections back into the mother companies. Editing staff is reduced to the absolute necessary, online journalist function more like content managers for their conventional media counterparts. Online journalism is seen as an instrument that conventional media content is transferred to, but no more as an independent media column. The conventional media once again determine the pace and the development of online mass media. Those who had been cautious with their investments during the hype now got back into the lead.
    Another effect was, that companies did not invest in software development anymore as the trust into a whole business section had been destroyed. Only a few companies like SAP stayed strong on the market and still provide business software. The lack of actualization of software has created loopholes for hacking as net security has bot been takes serious. A recent study shows also that the majority of SME are software pirates and do not buy the adequate software licenses.
    With the breakdown came also the media crisis: advertisements have been cut back by some 50% in some media sections. Of course this has to be seen still on a high level!
  4. Consolidation (2003) – first signs of consolidation of the market but also of online media and with it online journalism can be observed within this year. Online journalism right now searches its new position within the media and the media economy. As online advertising is the section within advertising that grows the media industry takes an observing point of view right now. The growth last year was about 10%, keeping in mind, though, that the whole segment is only about 2% of the whole market.

Germany as an Internet Nation?

Meanwhile the majority of people in Scandinavian countries use the Internet for quite some time as a mean of information and communication, Germany recently stepped over the 50% margin. The majority of the population is now online. The growth was unexpectedly high and has also to do with aggressive marketing strategies of the big competitors on the market. Especially the DSL-users grew immensely. That results in different usage habits: when you pay by the minute you will always have the clock ticking in the back of your head. You will only do the necessary research: with DSL most clients got flat rates which do not limit the online time. This broadens the time and the aspects used on the net. And this also explains why media consumption on the Internet grew and still is growing. But there is still a very stable percentage of OFFLINERS, people who avoid the Internet, who consciously do not use the net. Most of the offliners state that the information provided by the conventional media is sufficient and that they would not need additional communication options aside from writing and telephone. On the other hand they often are afraid of the technical requirements behind the internet usage as they often ask other people to look something up for them on the net. Important is, though, that more and more older people use the net which eventually proves that the net is not a youth medium but rather for all age groups and social classes. This knowledge adds to the role the mass media play on the net.

Altogether, the function of online mass media starts to shift as recent studies in Germany show. We therefore divide media usage into four dimensions:

  1. Dimension INFORMATION:
    using a medium to gather news and information, to be informed of recent developments, to get help with daily questions (includes weather report)
  2. Dimension ENTERTAINMENT:
    using media for relaxation, to have fun, to forget the daily routines.
  3. Dimension SOCIAL/ PARASOCIAL
    I want to participate in events and be able to communicate about them with others.
  4. Dimension HABITUAL/ STRUCTURING
    using media because I am used to it, because they help structuring my day

In the first dimension, most Germans rely on dailies (2000=39%, 2003=35%), then TV (2000=36%, 2003=30%), Radio (2000=17%, 2003=15%), Internet (2000=7%, 2003=19%)

Interesting: For informational purposes onliners turned in 2003 to the internet at 36%, the highest rating!!!

The Internet has therefore in Germany become a classical mass medium, still creating an informational gap, though. (old people, low social classes, less education), If mass media use the internet as real addition to their content (complementary) the attachment of younger people to this medium grows which is an important fact for media planners of the future. In the long run new business models might be developed and applied. The cost of printing for example, or the transmission in radio and TV might be replaced by internet sources. That means that the media have lesser costs and hand them over (in parts) to the user who might for example print out a paper in the morning. Maybe newspapers will soon hand over good A3 printers (or bigger) to their readers and let them choose the content that they want.

Still the problem of refinancing online media has not been solved as ad-revenues are still very low. Mostly they are related to e-business purposes. A shift to image ads might support the internet media development though.

A finance mix seems to be the only possible way (Ads, e-Commerce, Paid Content). Extended cross media strategies will create growing revenues for the Internet segment.

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