eCommerce Fuels Surge in Internet Users
By Cindy Christ

The holiday shopping season could peak today, with the biggest online shopping day of the year expected Friday or Saturday.

With a record number of consumers expected to shop online this weekend, December could prove to be the busiest month ever for Internet usage.

In November, holiday buying drove a big jump in Internet users, according to a study released Thursday by Nielsen/Net ratings.

The number of people in U.S. households who went online in November jumped 6.2 million people, up 9.1 percent from October, Nielsen/Net ratings said.

"One of the reasons why we've seen a large jump in Internet users during November is because of this year's busy holiday shopping season on the Internet," said Peggy O'Neill, director and principal analyst at NetRatings.

Active Internet users grew to 74 million from 67.8 million people in October. The current size of the Internet universe (those who have access from home, but did not necessarily go online) increased 5.4 million, rising 4.7 percent.

In November there were 118.4 million people with Internet access as compared to 113 million in October.

According to the study, the most visited web sites for November were:

1. AOL Websites (AOL)
2. Yahoo! (YHOO!)
3. MSN (MSFT)
4. Lycos Network (LCOS)
5. GO Network (SEEK)
6. Microsoft (MSFT)
7. Excite@Home (ATHM)
8. Amazon (AMZN)
9. Blue Mountain Arts
10. Time Warner (TWX)
11. AltaVista (CMGI)
12. eBay (EBAY)
13. The Go2Net Network
14. CNET (CNET)
15. Real Networks (RNWK)
16. Viacom International (VIA)
17. Xoom (XMCM)
18. Snap
19. Macromedia (MACR)
20. LookSmart (LOOK)
21. About.com (BOUT)
22. ZDNet (ZD)
23. SmartBot.NET
24. InfoSpace (INSP)
25. AT&T (T)

Before this year's record holiday shopping boom, the number of new Internet users had begun to decline. During September, an average 240,000 people went online, down from an average 750,000 earlier in the year, according to Media Metrix.

"We don't want to make too much of this, but we believe it may well be another sign of the flattening of growth of Web users in the U.S.," wrote noted Merrill Lynch Internet analyst Henry Blodget in a note to clients

Internet experts say that the decline also may confirm that business-to-consumer e-commerce is cyclical, much like traditional retailing.

Cyclical or not, "making purchases" has emerged as the fastest -growing online activity, according to the 1999 America Online/Roper Starch Cyberstudy.

The study found that shopping scored the most dramatic climb among Internet activities this year. Forty-two percent of Internet consumers say they regularly or occasionally make a purchase online, compared to 31 percent in 1998 - an increase of one-third. That increase was fueled in part by 54 percent more women - 37 percent compared to 24 percent in 1998 - shopping online this year.

While online shopping is most popular among more experienced users, it has increased among all online groups, including Internet newcomers.

In addition to confirming the rapid growth of e-commerce this year, the Cyberstudy shows that eTailing will continue to grow rapidly in years to come. Thirty-seven percent of all consumers say they will increase the number of purchases they make online in the next few years.

If so, market strategists say investors can expect to see this year's pattern in share levels of consumer-related Internet stocks repeated next year.

As the holiday season got underway, Internet portals like Yahoo! and service providers like America Online, which benefit from increased advertising spending and traffic gains on their sites, saw share prices rise.

Online retailers with offerings in top-selling product categories like toys, music, books and videos, software, and consumer electronics also got a boost from the holiday eTailing boom.

Analysts predict that as the number of older Americans and those with lower educational levels going online rises, sites targeting moderate income shoppers, such as Wal-Mart's or the coming Bluelight.com service announced this week between Yahoo! and K-Mart, also will thrive.

Although the web is beginning to become more mainstream, online consumers remain decidedly more affluent and educated than the population at large.

If there's a sure bet on who will reap rewards from continued growth in online shopping, analysts say it's shippers like United Parcel Service (UPS) and FedEx (FDX).

UPS estimates that it delivers about 55 percent of online purchases.

On Friday, UPS' busiest day of the year, the company was set to deliver 18 million packages. Since Nov. 23, the world's largest package service has handled some 300 million deliveries.

Rival FDX, which relies heavily on airplanes for its express operation, reported quarterly earnings above expectations Thursday, but said rising fuel costs would hurt future profits.

FDX shares gave up yesterday's 5 percent gain to close down $2.88, or 6.7 percent, at $40.

UPS finished up $2.63, or 4.1 percent, at $66.63. Intraday, shares traded as high as $67.63.

In an interview with CNBC, a Bank of America analyst predicted that UPS would be the clear leader in the Internet shipping space because profits from its truck-based operation aren't as dependent on fuel prices.

UPS, which held a wildly successful IPO in November, is set to issue its first quarterly earnings report as a public company in January. Analysts say Wall Street will be watching closely to see if UPS can deliver on projections for healthy profits from this year's holiday sales.