Businesses are still reluctant to advertise on the Internet although its impact in Malaysia has considerably surpassed that of developed countries such as Japan, Hungary and the United States, an international study revealed today.

Citing World Bank estimates, the Internet accounted for 4.1 percent or US$9.75 billion (RM29.64 billion) out of US$238 billion (RM723.52 billion) of the country’s gross domestic product (GDP) in 2010, said the ‘Online and upcoming: The Internet’s impact on aspiring countries’, a joint study carried out by Google and McKinsey & Company and released today.

Despite its significant contribution, businesses only allocate one percent of its budget for online advertising, stated the report, comparing the number of businesses that sell products and services online with many other countries with similar wealth.

NONE The report is the first of its kind to measure to the contribution of the Internet to economies and puts Malaysia among the highest of the fast 30 growing countries that the report highlights as crucial to the Internet’s future.

“A lot of this has to do with legacy. Historically, companies have been used to buying media in a particular way and form - print, television, etc - all have their reach and serve their purpose, reasoned Sajith Sivanandan, Google Malaysia’s country manager.

In the United Kingdom, businesses spend 25 to 30 percent of their advertising budget online, he said.

However, he pointed out that in the past decade, online consumerism has transformed “the way that consumers consume media”.

“Children today know how to use the iPad before they know how to write... what marketers need to get around is how they can take advantage of that,”  he told reporters at a press conference after unveiling the report in a hotel in Kuala Lumpur today.        

Travel firms and finance ahead of the curve

“Travel companies have been ahead of the curve, because you can consummate the transactions easier online than some others (businesses).

“Finance is another category that does very well online but there are regulatory restrictions that need to be worked out at the industry level and the government level,” said Sajith.

Nevertheless, online advertising is relatively low in most aspiring and developed countries, he said.

NONE According to Sajith, global information and analytics provider Nielsen stated that Malaysians spend an average of 20 hours online each week.

“It is equal to the time spent on television, print and radio - put together,” he added.

Nimal Manuel, principal at McKinsey & Company, Malaysia noted that the Internet contribution to the GDP included money derived from exporting equipment that allows people to use and connect to the Internet.

In his presentation, Nimal stated that Malaysians used e-government services comparatively higher than other nations.

According to the report, domestic online consumption is below average, where private consumption comprised 70 percent of the Internet’s impact in aspiring countries on average as compared to just 40 percent for Malaysia.

Shedding light on the low advertising budget, Nimal said that Internet usage by small and medium enterprises (SMEs), was also relatively low as only 100,000 out of the 700,000 SMEs are utilising the online platform for their businesses.

azlan "Internet accessibility is low for Malaysian SMEs due to high bandwidth and domain registration costs.

"For example, in 2010 it cost US$143 to register a domain in Malaysia compared to US$24 in the United States. 

“If policies are put in place to support financial and human capital development, including raising venture capital and research and development (R&D) spending and lowering the cost of starting a business, the future of Malaysia’s Internet ecosystem looks strong,” said Nimal.

He said that Malaysia ranked “slightly below average” in both human and financial capital. However, human capital can be increased by encouraging growth in R&D jobs.

 

“In 2010, Malaysia had 505 R&D researchers per million people, as compared with 1,166 in fellow aspiring country Argentina and 5,615 in developed regional Asian counterpart Japan.”