Net traffic: Heavy users down, gateway action up
EmptyReversing a long trend, the time Americans spend on the Internet did not increase this year, according to Goldman Sachs, a phenomenon that makes picking winning Internet stocks a bit trickier.
The Wall Street firm said consumers are spending about 21 hours per week online, down from 21.6 hours a year ago, with broadband users dropping from 23 hours to 21.8 hours and narrowband users falling from 19.5 hours to 19.2 hours.
The decline comes primarily from the Internet's heaviest users, with those who spend 40 hours or more on the Internet falling from 15% of users last year to 13% this year. When those users are excluded from the data, Internet users are online 16.5 hours a week, up from 16 hours last year.
Goldman Sachs also says fragmentation presents a challenge as users discover more Web sites that interest them but do not increase the overall time they spend online.
Fragmentation has caused the top sites -- those with 15 million monthly unique visitors -- to lose traction. Those sites saw a 7.8% year-over-year decline in traffic while medium-sized sites -- those with 5 million-10 million unique visitors -- gained as much as 4.5%.
All this means that "gateway" activities are increasingly important, according to Goldman Sachs. Those activities include e-mail, search, shopping, news, weather, maps, games and other things that keep surfers coming back for more.
The biggest gateway activity is search (including general information and research), which surfers spend 69.8% of their total Internet time doing. News, banking and finance, shopping and games round out the top five.
Sites that have done a good job of increasing their breadth of gateways are MySpace and MSN, both of which now boast 14 successful gateway activities. Yahoo and AOL have 12 and Google has 11.
Advertising on the Internet will rise 34.9% worldwide to $37.7 billion this year following a 33% rise last year. By 2008, 7% of total advertising dolars, or $46 billion, will go to the Internet, closing the gap vs. audience size. Currently, Internet users spend 21% of their media time online, compared to 25% for watching TV, 18% listening to music, 15% watching movies, 11% playing games, 5% reading and 5% shopping.
After digesting all this data and more, Goldman Sachs determines the best Internet stocks to buy are eBay, Google, GSI Commerce and VistaPrint. Stocks recommended for selling are CNET Networks and 1-800-Flowers.com.