IDC Looks at the ”Google Effect” and How Web 2.0, Long Tail Marketing, Buzz, and eCommerce Accelerate the Digital Marketplace

FRAMINGHAM, MA – AUGUST 3, 2006 – According to a newly published IDC study, a digital marketplace has emerged that both expands upon and threatens traditional markets. The study reveals that this marketplace, composed of gateways, nodes, and hubs, is growing rapidly due to a confluence of demand, technologies, customers, and changes in how people live their lives. The study finds that while this new economy threatens the business models for advertising, technology use, and distribution, it also creates significant opportunities for software, services, and hardware vendors.

"The digital marketplace presents a series of paradoxes," said Susan Feldman, a research vice president at IDC and lead author of the study. "It expands our reach from local to global, and yet shrinks the world so that it is more tightly knit. Our old familiar world of places, stores, and neighborhoods is now paralleled by a robust cyber-world that offers similar goods and services. Neither has replaced the other, nor are they likely to. The fact is, we live in both worlds, and the tools and services that make sense of, and connect these two worlds – helping users navigate both their local and their cyber-realities – represent opportunities for those who can identify the gaps and fill them."

The study reports that on a typical day 19 million people go online to find products, and 83 million people report that they have purchased products online at some point. The study credits Google, with its talent for creating buzz, as being the catalyst for this new online economy. Like a pebble dropped into a pond, IDC refers to the "Google Effect" to denote Google's pattern of taking seemingly small steps that create very large reactions. The study claims that Google's "genius" has been for combining existing elements successfully, and then presenting them in a compelling fashion.

Feldman adds, "Businesses of all sizes now realize that they must understand the digital marketplace, even if their business is only local. They will need the technical infrastructure to support the commerce, communities, networks and supply chains that this marketplace requires. IT vendors of software, hardware, and services need to seize these new opportunities, as well as understand the threats that lurk if they are not prepared for the profound changes that are taking place."

Key opportunities for software vendors in the digital marketplace include:

— Building digital marketplace infrastructure platforms

— Providing security software for wireless access, transactions, compliance, and collaborative tools

— Providing interactive applications to improve access

Key opportunities for hardware vendors include:

— Selling storage, networking, and servers to data centers and enterprises

— Supplying the hubs

— Preparing for the explosion of handheld devices

Key opportunities for services vendors include:

— Running the data centers

— Developing network management protocols and tools

— Creating services and tools that answer the question, "Is this data fit for this particular purpose, now?"

The study, The Google Effect: How Web 2.0, Long Tail Marketing, Buzz and eCommerce Accelerate the Digital Marketplace (IDC #202512), examines the factors that have combined to make the digital marketplace successful. The study defines the "Google Effect" and the emerging digital marketplace, and describes the roles and requirements for participating in the new economy. In addition, the study explores how IT vendors can make the most of this parallel economy, and examines the threats and opportunities that face software, hardware, and services vendors today and in the near future.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. Over 850 IDC analysts in 50 countries provide global, regional, and local expertise on technology and industry opportunities and trends. For more than 42 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com .

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