Consumer broadband firms flee to the corporate sector

As consumers tune out to the white noise that digital media and convergence start-ups have created since flooding the Internet in...

As consumers tune out to the white noise that digital media and convergence start-ups have created since flooding the Internet in the past three years, the growth of broadband technology - from content firms to the technology companies that deliver that information to consumers and business - is being re-evaluated.

That seemed to be the consensus yesterday at Convergence 2001, a broadband conference in San Francisco presented by digital media research firm The Carmel Group.

Dwindling hope that consumers will adopt the Internet as a new venue for mass communications, equal to television and radio - and pay for it - has led technology developers and investors to become interested in the corporate market.

"There's now a trend toward moving into enterprise because they are the customers that write the cheques," said Lynda Keeler, managing director for Redleaf Group, a venture capital firm investing in the broadband and digital media space.

As has been proven time and again that most customers are not willing to pay for content on the Internet. As a result, businesses that measured success in terms of page views rather than income sheets are now scrambling for a new market.

"Stickiness and eyeballs don't count anymore," said Satish Menon, chief technology officer of Kassena, a digital media platform developer that emerged out of Silicon Graphics. "We need to focus on what makes money today - that's in the enterprise space."

Spending by corporations and small and medium-sized businesses on broadband software and hardware reached $140m (£97.8m) in 2000, according to Jupiter Media Metrix. While that is a small percentage of overall IT spending, the figure is pegged to grow to $2.8bn by 2005, Jupiter Media Metrix estimates. With the corporate market growing, and the consumer market losing much of its steam, most companies working in the content delivery space are running, not walking to acquire business customers.

Moving into the corporate sphere will be a tough transition, venture capitalists and business executives have claimed. The most difficult shift will be for companies that launched their businesses, and raised their investment capital, for a target market of consumers. Corporate IT buyers are a very different breed of customer to consumers, according to Keeler.

"Many of these companies don't have the experience, for instance, of selling hosted software to corporate customers," she said.

Another difficulty has to do with the slowdown in the economy. Alex Bennick, an associate with venture capital firm Battery Ventures, whose portfolio companies include content delivery firm Akamai Technologies, noted during a panel discussion that corporate information technology spending is "stuck in a holding pattern," and most of the potential corporate customers are not buying into the idea yet.

"The focus on the enterprise is really the key market that the industry needs to turn its attention to," Bennick said. "But it will rely on a leap of faith on behalf of enterprise CEOs."

But the questions still remain whether broadband and streaming media can even penetrate the corporate market, especially when companies are investing less into new technology. And there is little evidence that investments in streaming communication will reduce costs in other parts of a business, Bennick said. For instance, do companies that invest in Webcasting software and hardware save money on corporate travel budgets?

"It's something that businesses need to prove on a case by case basis," he said. "Evidence is starting to emerge."

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