This week there’s been two pieces of research that have shown that online spending is where ‘it’s at’ – as if you needed convincing.

A league created by analyst TNS Worldpanel revealed that in an annual top 10 list of favourite retailers in the UK, Amazon came 2nd (Tesco was 1st) and eBay came in at number 10 (full report), and research carried out by PwC and WARC shows that 2008 internet advertising expenditure defied the recession by being up by 17%, with the UK now said to be ‘the world’s most advanced market for internet advertising’ (full IAB/PwC report).

I don’t think that this marks the end for bricks and mortar stores or for traditional forms of advertising, but for brands, it’s now more important than ever to ensure their online offering is up to scratch. 9 out of 10 times the first place people go if they are interested in a product is the brand’s website. Apart from ensuring that a positive first impression is made, it’s important that the online design reflects the offline brand. Too often, websites are treated as the poor cousin of the print or TV ad. This is costing brands sales and customers. People online are less forgiving than in the real world. They have many more choices of where to go and within a single click, they’re at a competitor’s website.

Having said that, if online is used properly, it can also be responsible for increasing footfall to stores (I’ll post a full report on this soon). More and more, customers are going online to check the range of products BEFORE visiting the real world store (which could be a significant journey to some). Why risk a wasted journey? The reality is, etailers are simply not displaying their full wares online – for whatever reason – which is ultimately costing them sales online as well as offline.

The message from these reports is clear. It’s all about choice. eCommerce shouldn’t be seen as a threat to traditional retail, but as a key tool in a multi-channel retailing strategy. In a highly competitive market, it’s essential that you make your customer king. Allow them to shop and view on and offline. Give them as much insight and information at each touch point. Provide a 360 degree returns option. Everyone needs to up their game in this climate or risk losing customers to their leaner, more innovative competitors. Etailing and traditional retailing must work hand in hand to ensure survival.

The emergence and abundance of free content online over the past number of years has had a profound affect on the way many of us conduct our lives and indeed the way businesses conduct their business.
Whether email, newspapers, Skype, Wikipedia, Spotify, etc., how come we’re so deserving of all these free services when we were absolutely willing to pay for the same (similar) right less than a decade ago?

And how free is free? Is it sustainable? Must companies now monetise or die? Or risk asking Generation Free to pay for content?

These were some of questions being tossed around the basement in a slick-Soho bar last night at the UK’s Trade & Investment Chinwag discussion, cleverly titled Freeconomics.

A panel consisting of Azeem Azhar, managing partner at Open Capital Partners; Victor Keegan, technology columnist at the Guardian; the night’s MC Nic Brisbourne, venture capitalist and partner at DFJ Esprit; Charlie Blake Thomas, commercial director at Huddle; Alan Patrick, consultant at Broadsight and finally Bruce Daisley, representing YouTube.

On the agenda: free content, and at what cost does success at “free” come with..

For example, storage dependant sites such as Flickr, YouTube, Facebook, subsidies from display advertising can not meet the costs of scaling.

But what are the other options, and what issues do they bring? Why for example do Freemium models (free ‘basic’ and paid ‘pro’) work for some and not for others (think flickr vs Facebook)? Will we see a return of micropayments?

Before panic sets in, the panel agrees that a universal micropayment approach seems a bit far off, but would be a possible solution for a number of businesses struggling under the advertising decline, specifically newspapers.

Victor Keegan said if a micropayment system would have been introduced when the internet was still a nascent luxury, relegated to programmers and D&D enthusiasts, then “we wouldn’t be in this mess”.

He gives an example of a teenager sending a text-message, they don’t think twice about sending a 50-word text message for 18p, but scoff at the idea of having to pay for a 25,000 word email, simply because the micropayment system has always been there for texting, it is engrained in its structure.

Today’s generation has grown up with free email, with nearly limitless storage, such as Gmail, which was criticised last month when its servers crashed, rendering the service useless for a number of hours – invoking a strange kind of furore that could only be quelled by reminding users that Google offers the service for free, thus, no reasons to be angry.

It brings the question whether ‘free’ is really ‘free’, obviously Google serves targeting advertising to users in exchange for using the service, which brings up the question, who is the service for?

Charlie Blake Thomas said that Google really isn’t a service for us, the searchers, but actually for advertisers, where it gets its revenue from, we’re just the middlemen, acting as a muse.

Thomas said that understanding who the end user for your business is critical when deciding at what point will users pay, and how it fits into the overall business.

Azeem Azhar said that even though Google figured it out, thanks to the proliferation of open source software, we have witnessed the end of big companies making huge profits, such as Microsoft, or Google itself.

Azhar said: “It’s difficult for people to accept but the granduar of a huge company like Microsoft has been shifting to teenagers coding in their parents basement. It’s not the American dream.”

Alan Patrick said that open source software, such as Linux, has also shifted the economics to the user, when suddenly companies are forced to upgrade their systems on their own instead of those who created the software.

The people who have created this free software aren’t getting rich, but they’ve managed to offset costs by shifting the expenses to the user.

To the dismay of Nic Brisbourne, venture capitalists were given a lot of slag for the current state of affairs, by encouraging digital startups to seek out audiences with loads of free content without having a business models first or ways to monetise traffic.

But for new start-ups, is it better to have a premium product in which you can charge a few hardcore, loyalists, or free content to the masses at your expense, hoping advertising revenues will pick up.

A large portion of the evening was dedicated to talk about the newspaper industry, however the panel offered a refreshing view on the plights of print, opposed to what is being espoused in the media itself.

The introduction of new devices such as the Kindle and the iPhone could be an industry saviour, as paid digital content could translate better on these handhelds better than on a computer screen.

There is new innovation about, including in Japan where readers pay simply for a newspaper barcode, which allows access to online articles.

Newspapers are also looking at manufacturing their own proprietary hardware to carry about digital editions of their content.

The panel predicted that a number of newspapers will make the transistion online, its inevitable, but print will never completely die out.

Charlie Blake Thomas said that the industry needs to face its ‘Kodak Moment’ when the film company itself realised that the entire industry had shifted digital, and it had to react to stay in the game.

The panel said that newspapers are afraid to make the first leap because of the readership that could be gained or lost by making a miss-step. They asked for more collaboration between titles, but not mergers, as that would only inhibit innovation, allowing newspapers to wallow in complacency, like they have been doing for the past 20 years.