Philippines Internet Review Blog

State of E-Commerce, Digital Marketing, and Internet at 18 in the Philippines

2012-04-07T13:27:00.001+08:00

Last March 22, I was a guest at ANC Future Perfect and talked about the e-commerce landscape and DigitalFilipino E-Commerce Summit. Here are some insights I shared then and learned from the Summit.

State of E-Commerce in the Philippines

Last March 29, the Philippines historic connection to the Internet turned 18. I think we have gone a long way and grew so much. But am also sad that we don't have enough data gathering process and tools in place to accurately measure it.

We Need Data: Philippine Information Society Data Alliance Project

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For instance, broadband subscriber base has increased by 45% to over 2.9 million in 2011 compared to a year ago. However, most industry peers still peg the number of Internet users to 30 million in the Philippines. Around 1/3 of it were assumed to be household users. This number was also used for the past 2 years.

The Yahoo -Nielsen Net Index 2011 peg e-commerce growth to have declined from 3% to 1% partly attributing to Internet usage not achieving growth in some urban areas in the country.

Digital Philippines 2011 Yahoo - Nielsen Net Index Highlights

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Jack Madrid (country manager of Multiply Philippines and president of DCOM) believes we are still on day 1 in e-commerce. His perspective on our e-commerce numbers is more or less similar to what Donald Lim has estimated - which is around P4.3 to P5 billion.

Of course, to folks like me (with my biases), the decline or this status quo in e-commerce transactions is not acceptable. Especially when you get to see other reports that paints a much more optimistic perspective on e-commerce. My take on this one is that around 18% to 20% of the current Internet user population do e-commerce trading (selling of products or services) where the actual closing of transactions can take place both online or offline.

ASEAN E-Commerce Database Project 2010 Report

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As I look at the winners of DigitalFilipino Web Awards in 2011, where the list was generated based on pure performance numbers, they are mostly e-commerce players where revenue is derived from sales, advertising, and consumers-to-consumers trading with each other. I can't help but wonder on the following:

Should airline site online sales not be included in our overall e-commerce revenue count? If yes (excluded), does that mean the online booking sales of hotels and tours shouldn't be counted either? (My estimate is around 10% buy airline tickets online.)
Should we consider bills payment done through the Internet and mobile banking an e-commerce transaction? (My estimate is at 7% of current Internet users does online banking and likely to be doing bills payment too.)
How will we treat offline face-to-face sales that transpires between buyers and sellers who met through marketplace sites like Multiply, Sulit, AyosDito and the likes? This especially to sales of real estate properties and cars.

Indeed, there are a lot of e-commerce transactions happening in our country that are not captured. This includes professionals receiving payment for services rendered in marketplace sites like o'Desk, bloggers advertising income, and the likes.

With group buying sites also selling hundreds to thousands of coupons per day, we certainly need to have better measurement indicators to monitor our growth. This is the biggest problem we have right now. Our inability to accurately report the growth of the e-commerce sector. It is also the reason why it is not getting the support it deserves.

If your organization is interested in giving data, that can be posted publicly, to support the Philippine Information Society Data Alliance Project, kindly contact me.

Changing payment forms, online banking, and financial services

When Multiply empowered their members to accept payments from Paypal, credit card, mobile phone, and cash, I believe it really shook the e-commerce space as getting an online merchant account was never easy. With Cashsense also allowing merchants to receive payments through MLhuillier and 7/11, an online seller now has many resource available to process online sales.

But with current economic conditions, the decision to buy "aspirational" items may take more time. This includes finding second hand units or looking for some special bidding sites where these items are offered at low cost. This is where new sites like ShopInstallment fill the gap. Gadgets can be purchased in installment without having the need for a credit card. For a transaction to proceed, it requires submission of documents which a lot were unable to do so. As a result, only 10% of total interested buyers were able to avail of its installment program to date.

For those with personal needs, a loan can be applied from one-year old site Lenddo that grants money lending from cash loan to education loan. It intends to serve the young middle class who doesn't necessarily have any credit rating yet.

Lenddo FAQ and Fact Sheet

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As far as Internet banking is concern, admittedly, it is great to see more banks offering Internet banking services, bill payments, and the like. However, the reality of local inter-bank fund transfer is still not in place for the regular depositor. It is a premium service given by some banks and not a default service that any online banking user can gain access to (and pay for). I guess it will take a very long time before this can be a reality unless the Bangko Sentral ng Pilipinas will take on the leadership and impose this as a mandatory service to customers.

Internet Banking in the Age of Social Media

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State of Digital Marketing in the Philippines

Donald Lim's (country head of MRM Worldwide) presentation during the DigitalFilipino E-Commerce Summit is more trends-oriented - where it is likely to move forward especially in relation to e-commerce. It made me contemplate on how we are doing in this area.

When you look at the online marketing initiatives by a lot of brands today, much of it remains the same where a lot carry out the same old contest format (photo / video / status sharing, voting, game applications, blog, etc), blog post events / campaigns, etc.

Creating Award Winning Integrated Marketing Campaigns

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In 2011 and this year, there are a few adventurous ones that included hash-tag related blitz where part of the success benchmark is whether it will trend or not. Hopefully, there will be more location-based services type of campaigns this year for the brick and mortar establishments.

A growing number of companies are allocating budget for digital marketing. But the bottom-line is, we can't just keep spending money without having a clear indicator on how can it impact revenue. Success has to be measured beyond non-financial metrics.

In addition to hard core reliable data on our e-commerce situation, businesses need to understand prospects more - beyond what we typically get from traditional market research as the current user base (especially the young ones) are gradually responding differently to it - often not consistent to what they do.

We see consumers complaining on ever-rising cost on basic commodities but may think otherwise when buying premium products from expensive snack (such as the recent Magnum ice cream mania), clothes, to gadgets.

Regardless of what ways we market our service, the trigger point for purchase is still emotions. "We buy with emotion and justify it with logic." Although this would require triggering various fascination factors depending on the segment we want to attract.

The need of management for clearer ROI versus the need of designers and marketers to take the risk with their creative ideas can result to conflict. But if you believe that purchasing actions can be triggered by emotions, giving such leeway will be necessary.

This personal belief was also affirmed when Donald shared SoLoMoNoCo, a term coined by Mark Cripps of APAC MRM Worldwide. It refers to Social + Local + Mobile + Numbers + Commerce. The two additions refers to the need for metrics to be tied up and how it influence or impact spending.

Death of Group Buying

Donald believes that group buying will soon reach its end. He shared the idea that from usual group buying, people will be inclined to explore for ways where they can share resources. In these hard times, I guess that is convenient and practical for market segments that have limited purchasing resource.

Also, I have talked to two industry contacts lately whose companies were formerly known for their group buying and special deal sites. The shift to services, offering their platforms to leading brands, was driven by noticing a market plateau. This is where despite decreasing number of players, the buyers segment is not growing - and even shrinking.

A reason given is dissatisfied merchants where coupon buyers don't return to try another product or service. I guess the counterpart reason behind this is that a lot of merchants have also downgraded the product or service they offer just because they gave the product or service at a discounted price. This resulted to disappointed customers. Instead of saying, "I got a great deal." They will say, "I got what I paid for and not the package as promised."

Another reason cited is sales promotion regulation where current rules require any online site selling items on promotion (including the conduct of promotions that does not require a purchase) should get a Department of Trade and Industry Sales Promotion Permit at least 30-days prior to the actual promotion. The launch of industry association DCOM intends to address this issue, in collaboration with the Department of Trade and Industry, and encourage an environment supportive of e-commerce growth.

I think as soon as group buying came into play, special deals or daily deals site immediately tried to provide an alternative in our local space. In the end, those that offer great deals shall thrive. This segment being able to penetrate nearly 5% of the Internet population is off to a great start. Will they be able to sustain or grow further remains to be seen as many have tried and gone already. Currently, am monitoring sites that includes Ensogo, Groupon Philippines, CashCashPinoy, CleverBuy, DealGrocer, among others and will be posting a story about this segment soon.

Are Filipinos receptive to e-commerce?

If the top sites will serve as indication, I truly believe that e-commerce is taking off in the country. The percentage may be the same as I have been using the 18% - 20% number since my first Online Shopper Report. But that base is growing as the population average age increases.
DigitalFilipino Stats Report - Filipino Online Shopper (1st Issue)

As we reach the demographic sweet spot this 2015, I believe e-commerce will also explode at that time as the average Filipino then will be 25 year old - which the government believes as major resource for our economic growth.

Youth's Role in Social Media and E-Commerce Growth

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This is also the reason why a strong push is being made and necessary, from groups to bootcamp events, encouraging more start-ups in the country. We need to support young entrepreneurs who understands the need of their rising generation. Help them become entrepreneurs rather than being reliant on traditional jobs.

Increase Online Trust

As more users try their hands on e-commerce, in addition to referrals, trustmarks are slowly gaining recognition. Multiply released the Multiply Trust program where sellers, merchants, and business can avail of. This gives them privileges from priority listing, faster payout, to marketing support.

Sulit, on the other hand, partnered with Qartas and publicly announced it last January 2010 to encourage sellers to get SureSeal or SurePass for identity verification. In return, they get priority listing for their products and services on the web site. However, the partnership between the two already ended last February 1, 2012. Sulit is expected to replace it with another system that will likely embrace an in-house approach due to cost constraints.

Dun & Bradstreet is also introducing itself to local players in this space - particularly in business-to-business segment. Its famous product or service is the DUNS Number that allows a business to have a unique ID and can be used globally when doing inter-corporate transactions.

Despite these trustmarks, consumers will have to be vigilant from products they purchase online to online promotions they joined in. From personal experience (that may have developed a bias on my part), industry associations, whether in e-commerce or digital marketing, will likely take and protect the interest of their members first rather that of their target consumers.

How about mobile commerce?

With a growing number of mobile devices from tablets to smart phones, we can expect more sites to extend their services in this channel soon. Sites like Reebonz already does it. (Although this is a Singapore site that delivers to the Philippines in partnership with BDO for payment processing.)

I guess it will be just a matter of time. Especially when the ratio reaches to more than 20% of the site's total visitors, players will likely start taking the plunge.

August 1997: Internet Commerce Expo Manila

2012-03-29T15:46:00.002+08:00

WS Expositions organized the Internet Commerce Expo Manila 1997 (ICE Manila 97) at the Shangri-La Hotel Makati City. This event introduced the WS Group to Fiesta Online, known for Yehey.com

Yehey.com in 1997

2003: Level Up!

2012-03-29T15:40:00.003+08:00

Level Up! Games licenses the Oz World and Regnarok online games. These become popular among young players, increasing growth in Internet usage at home and in cybercafes, and promoting e-commerce through oline ordering of credits. The company is adopting the Korean model of multiplayer online gaming.

LevelUp! in 2005

2003: PICS SME IT Excellece Awards

2012-03-29T15:32:00.000+08:00

The Philippine Internet Commerce Society launched its PICS SME IT Excellence Awards in the 2nd E-Commerce Congress and recognized Godiva for its efforts in adopting ICT and Internet use.

Godiva in 2001

2004: PLDT vs. PLDT

2012-03-29T15:27:00.002+08:00

The dispute over PLDT.com between the Philipine Long Distance Telephone Company (PLDT) and Gerry Kaimo peaked on January 29, 2004. A judge of the Quezon City Regional Trial Court denied the request by PLDT for a preliminary injunction.

PLDT accused Kaimo of infringing on the intellectual property of the trade name and "engaging in unfair competition for using the trade name."

This is not yet the end of the story, which started on in September 1999 when PLDT filed a 1.35 million peso lawsuit against Kaimo. Kaimo expected PLDT would appeal the case to higher courts, while preparing his own 50-million peso countersuit against PLDT.

PLDT in 1997

1997: Internet Commerce Expo

2012-03-29T15:23:00.001+08:00

The WS Expositions Group organizes the Internet Commerce Expo in September 1997. This shows that Internet commerce deserves its own events.

The ATM network Bancnet operates an ISP for its member banks. This made use of the existing connections between the Bancnet system and its members.

1998: San Miguel Draft Beer

2012-03-29T15:20:00.001+08:00

San Miguel Draft Beer goes online. This is the first full e-commerce site operating from the Philippines. The proponents were World Port (an Internet services consulting firm), IBM, San Miguel Coporation, nd Equitable Card Network; with the support of Intelligent Wave Philippines, and Infocom Technologies Incorporated; working with the Department of Trade and Industry (DTI) and the E-Commerce Promotion Council of the Philippines (ECPC). This showed that the Philippines is capable of facilitating online commerce.

San Miguel Draft Beer in 1999

1994: Portal Inc.

2012-03-29T10:32:00.001+08:00

Binary Systems Holdings, Inc. puts up a commercial online service, called Portal Inc. (portalinc.com) that offered "a commercial online service (much like that of Delphi, Computerserve, even AOL) which, like the humble BBS, was the precursor to the ubiquitous Internet Service Providers we have now. (The system) was a proprietary online system with its own viewers (precursor to the browsers), email, etc. It started as a commercial online service that was available to its subscribers, 24 hours a day".

This ran along the same lines as EMC Online. The systems back then were "proprietary" since no unified standard for online systems has emerge, prior to the world Wide Web and today´s standard HTML-based interfaces.

1999: Auction

2012-03-29T01:45:00.003+08:00

Auction sites flourish, following the trend in the US, with popular services such as eBay. These include eAuctions.ph, which closed and reopened as Avalon.ph; PinoyAuctions, which was acquired by ABS-CBN and merged with PinoyCentral; and Bidsho t, which offers SMS-based bidding. These make use of a C2C (Consumer to Consumer) model where the buyers and sellers transact directly and the website merely facilitates the meeting of the two.

E-store also began its e-commerce store operations.

Bidshot in 2009

2001: PhilDAC

2012-03-29T00:58:00.002+08:00

Various developments heated up the issue over the PH domain. The group opposed the dotPH and Joel Disini organized PhilDAC (Philippine Domain Authority Convenors). dotPH president Jose Emmanuel Disini sues Fernando Contreras, Jr., president of PISO (Philippine Internet Service Organization) and ISP Inter.net.

2001: Prosperity.com

2012-03-29T00:52:00.001+08:00

Prosperity.com is found guilty of selling and distributing securities user an illegal pyramid scheme. It was selling expensive websites. During this time, Multi-level Marketing (MLM) schemes became popular on the Internet.

2001: Yahoo Computer Services

2012-03-29T00:18:00.000+08:00

Yahoo Computer Services, a local company, loses yahoo.com.ph to Yahoo! Inc. This is the first time a Philippine company enters into a domain dispute with a foreign corporation and a well-known Internet brand. This shows that the scope of the well-known Internet names is global, and Internet companies are concerned about misuse of their name even for local domains.

1988: The Science and Technology Advisory Council

2012-03-29T00:15:00.000+08:00

The Science and Technology Advisory Council is formed to coordinate "expatriate human resources in key development programs of the country." Its electronic network STACnet is important because it bought interest to the fledging Philippine Internet from around the world. The first e-mail sent from the live connection at the University of San Carlos was addressed to STACnet.

1992: Dr. William Torres, Father of the Internet

2012-03-29T00:11:00.001+08:00

Dr. William Torres was the managing direct of the National Computer Center, the government agency promoting computerization in the country. At that time, the US academic, non-profit Internet was of the NSF (National Science Foundation) network. The NSF was headed by Steve Goldstein. The two met and Dr. Torres was convinced that a full-time Internet connection was necessary.

1994: First Live Internet connection

2012-03-28T23:54:00.001+08:00

Setting up the first live internet connection was a cooperative effort of different groups.

Dr. Torres approached the Manila Electric Company (Meralco), and the Philippine National bank, since thy were well-funded entitles. Both declined to fund the project.

DOST Secretary Ricardo Gloria heeded Dr. Torres´ proposal for the Philippine to connect to the Internet He included it in the Science and Technology Agenda for National Development. (STAND). Dr. Rodolfo Villarica of the Industrial Philnet was formed. Dr. William Padolina became DOST secretary and oversaw the project.

Philnet started out with an email connection for "Phase I", performed through a dialup UUCP (Unix to Unix Copy Protocol) connection made between the Ateneo de Manila University and the Victoria University of Technology in Australia. De La Salle University and UP Diliman joined the dialup network to receive international e-mail through Ateneo gateway. This connection used UCCP to bcd up mail to and from the Internet from the participating institutions.

The DOST made a grant of Php 12.45 million to the IRF to implement Philnet "Phase II", for a direct, liv connection to the Internet.

The DOST contracted Computer Systems Network Corporation (ComNet), a networking equipment vendor to implement the network linking the various and universities and organizations Arnie de Rosario then chair of the Ateneo Computer Science Department, informed the chair of ComNet, the late Dr. Willy Gan about the project. Dr. Gan drew up the PHnet network design and convinced PLDT to deliver the facilities in time for the March 29, 1994 launch in Cebu. This was to coincide with the E-mail Conference headed by Dr. John Brule, a fried of Dr. Villarica and a visiting professor at the University of San Carlos. Benjamin "Benjie" Tan headed the technical part of the project.

Later, Philnet is renamed to PHnet to avoid naming conflict with another group, a "philosophers´network"

1994: Philippines' first internet link

2012-03-28T23:47:00.004+08:00

March 29, 1994: The historic activation of the Philippine´s first internet link with a permanent TCP/IP connection. This was 64 Kilobit per second line using PLDT and Sprintlink, the IP service of US telco Sprint. Benjie Tan did the activation on the router co-located at the PLDT premises in Makati City, while Richie Lozada of Ateneo handled the Cebu end. This was in time for the target date, the dad of the E/Mail Conference led by Dr. Brule, held at the University of San Carlos.

The 64 Kilobit per second line run by PHnet is upgraded to larger capacity links, until the point where PHnet buys service form Bayantel´s Internet service instead. This is when the institutional members of Phnet shifted their uplinks to commercial ISPs.

2003: PLDT Cyber Madness

2012-03-28T18:15:00.003+08:00

PLDT offers the Cyber Madness promo. It partners with dealers to offer computers on an installment basis when tied up with a dial up or DSL broadband subscription. This expands their consumer base beyond customers who already have PC´s, and aim to improve the low domestic PC penetration which hurts Internet expansion.

To this date low credit penetration due to low income is a barrier to e-commerce adaptation. Traditionally, Internet commerce systems ave been dependent on credit cards. Fraud concerns also stop people from using their cards on local sites.

PLDT in 2009

2003: Online Fraud

2012-03-28T18:03:00.000+08:00

Online merchants outside the counter block transactions originating from the Philippines and some other countries. This measure is intended to prevent credit card fraud by blocking customers en masse, instead of addressing fraud on a case-to-case basis. One merchant with this policy is the domain registrar GoDaddy.com, which now blocks IP connections from the Philippines. Their blocking strategy affected local domain owners who used them to register domains. The Philippines is known among merchants to ave high incidence of online fraud.

GoDaddy.com in 1999

2000: B2B Business Exchanges

2012-03-28T17:23:00.001+08:00

B2B Business Exchanges started operating, to offer services for corporate buyers and sellers. These include Bayantrade, formed by a consortium of large companies; SourcePilipinas, from the Yapster group; B2B Price Now; and PhilBX (Philippine Internet Business Exchange) from the SSI group. These systems allow companies to achieve savings and increase efficiency by bidding and procuring online. Since the companies involved have existing relationships, this avoids the B2C (Business to Consumer) problem of Philippine e-commerce where payment systems are not well developed.

Bayantrade in 2000

2000: The E-Commerce Law (Republic Act 8792)

2012-03-28T16:49:00.004+08:00

The E-Commerce Law - Republic Act 8792, was signed into law on june 14, 2000. It has a scope much wider than the "e-commerce" in its name, as it also covers digital signatures and "hacking" activities. The salient features of the E-Commerce Law are listed here: http://www.digitalfilipino.com/writing_article.cfm?id=19

E-commerce Law - Republic Act 8792

1996: The start of internet banking

2012-03-28T15:44:00.002+08:00

In December 1995, Urban Bank announced its plan to start a virtual bank. In 1997, the bank introduced its Home Virtual Banking service.

First investment bank website (information) was BPI Family Bank (http://www.bpi.com.ph).
(December 1996)

Today, many banks offer transactional services over the Internet, allowing their customers to access their bank accounts and services.

1989: PH Domain

2012-03-28T14:33:00.000+08:00

Jose Emmanuel "Joel" Disini administers the PH domain, the top level domain for the Philippines. He obtained the rights from then-administrator of the global DNS services, Dr. Jon Postel. He operates an e-mail service called the E-Mail Company.

This was formally assigned to him in 1990.

More info here.

2001: Blogs and Online Journals

2012-03-28T13:22:00.000+08:00

Blogs and online journals became common. These are text-oriented sites that reflect the daily opinions or chronicles of their publishers. They add fresh content from a a personal point of view, as opposed to the corporate view espoused by mainstream websites. Blogs allow bits and pieces of information from the Philippines make their way to Filipino readers abroad. Online games (not gambling) become available with local servers, Mindgate offers pinoybattle.net, which provide action and shooting-oriented games. Surf Shop operates gamena.com, offering boards and card games.

1999: PinoyExchange.com

2012-03-28T10:16:00.001+08:00

PinoyExchange.com forum started operations. It became one of the largest online communities in terms of message volume, users and mind share. iAyala, the Internet venture arm of Ayala Corporation, made an investment in 2000. Several other forums followed. The site remains the most steadfast Filipino online community.

June 1996: The Philippine Internet Service Organization (PISO)

2012-03-28T09:47:00.001+08:00

The Philippine Internet Service Organization (PISO) was formed with Albert Velasco of (Mailstation Net) as the first president. This was the fruit of discussions among ISP officers since late 1995. The ph-isp mailing list served as the online forum for these initial discussions. On August 20, the officers and trustees were inducted in Malacañang by President Fidel V. Ramos.