November 29, 2001

2001 UCLA Internet Report Finds Declines in E-Commerce, Major Concerns About Online Privacy and Credit Card Security

Los Angeles — UCLA's year-to-year report on the impact of the Internet released today leaves little doubt that going online is now a mainstream activity in American life that continues to spread among people across all age groups, education levels and incomes.

However, the study also found that enthusiasm for e-commerce is down, broad concerns remain about Internet privacy and security, and television is the primary victim of increasing Internet use.

"We are beginning to see a vivid picture of behavior concerning the Internet," said Jeff Cole, director of the university's Center for Communication Policy, a research unit in UCLA Anderson that is affiliated with the College of Letters and Science.

"By returning to the same people we talked to last year - and will talk to in future years — we are transforming our 'still photograph' of American life from our 2000 study into a 'moving picture,'" Cole said.

"These findings are creating an unprecedented look at how the Internet is changing social, cultural and economic behavior," Cole said. "We can see the impact of the Internet on last year's non-users as they become this year's new users, on modem users as they move to broadband, and on last year's users as they gain a year of online experience. We are even able to see some patterns of behavior within that tiny portion of people who stopped using the Internet, to see if they stay offline permanently, or, if and when they return, what brought them back."

The Internet: Popularity continues to grow after the dot-com crash

"Despite the dot-com meltdown, we found that the Internet is more vigorous than ever; a large majority of Americans go online, Internet use continues to increase and growing numbers of non-users expect to go online in the next year," Cole said. "Yet, many issues of concern about the Internet remain from 2000, and new concerns have emerged in 2001."

The 2001 UCLA Internet Report, titled "Surveying the Digital Future," provides a comprehensive year-to-year view of the impact of the Internet by examining the behavior and views of a national sample of 2,006 Internet users and non-users, as well as comparisons between new users (less than one year of experience) and very experienced users (five or more years of experience).

The second year of the UCLA Internet Project compares findings from 2000 to 2001, looking at five major areas: who is online and who is not, media use and trust, consumer behavior, communication patterns, and social and psychological effects.

"The dot-com crash, along with the broad economic decline in 2001, could have created an immense shift in online use, loss of credibility for the Internet among users and dismal prospects for new access by non-users," Cole said. "The broad issue we considered in 2001 was: How did a backdrop of economic meltdown affect users and non-users of the Internet? Would Internet users lose faith in online technology? Would Internet use decline? Did the collapse of the Internet boom affect online purchasing and other use?"

Major Findings: Highlights
Among the more than 100 major findings in the UCLA Internet Report are (page numbers from the report are in parentheses):

Internet users: Broad use, general satisfaction (Pages 17 and 87)

The UCLA Internet Project found that 72.3 percent of Americans have some type of online access, up from 66.9 percent in 2000. Users go online an average of 9.8 hours per week, an increase from 9.4 hours in 2000.

Users of the Internet are generally satisfied with the technology, with the Internet overall achieving a rating of 4 on a scale of 1 (not at all satisfied) to 5 (completely satisfied). The most satisfying feature of the Internet is users' ability to communicate with others.

E-commerce: trends (Page 38, 40, 41, 45, 48 and 52)

"Overall, there is no question that the economic decline in 2001 clearly had an impact on Internet commerce," Cole said. "And, while Internet use remains high, and users have continuing high regard for the Internet, several trends about online buying continue to develop — especially regarding credit card security — that could have major effects on the evolution of Internet commerce."

Internet shopping overall — Online purchasing in general continues to be strong; 48.9 percent of Internet users made a purchase online in 2001, down only slightly from 50.7 percent in 2000.

Shifts from traditional retail — Internet purchasers in 2001 report shifts away from traditional retail buying, but at a lower level than in 2000. More than half of Internet purchasers in 2001 (52.8 percent) say that online purchasing has "somewhat reduced" or "reduced a lot" their purchases from retail stores — down from 65.2 percent in 2000.

Will online buying increase? — A smaller number of Internet purchasers in 2001 than in 2000 say they will eventually make many more purchases online (43 percent in 2001, down from 54.5 percent in 2000).

Pricing online — Internet purchasers do not consider the Internet a hunting ground for bargains. In 2001, 22.8 percent of Internet shoppers agree that prices online are lower than in traditional retail stores.

Sales tax — Of current Internet purchasers, 43.3 percent agree or strongly agree that the addition of sales tax for online purchases would reduce their buying on the Internet.
Concerns about credit card information: A major problem (Page 53)

In both 2000 and 2001, the UCLA Internet Project found deep concerns about privacy among new users and very experienced users alike; prominent among the privacy issues was concern about credit card security.

When asked about the security of credit card information when making online purchases, nearly all users (98.6 percent) in 2001 with less than one year of Internet experience express some concern about credit card information when buying online.

Although concerns about credit card information decline somewhat among very experienced users, the numbers are nevertheless significant; after five years of experience online, the 98.6 percent of users who are concerned about credit card information online declines only 9.5 percent, to 89.1 percent of very experienced users. Of very experienced users, 57.2 percent remain "very concerned" or "extremely concerned."

"Americans have widely divergent views about credit card security when used in traditional purchasing compared to online shopping," Cole said. "Restaurant patrons who think nothing of leaving a signed credit card receipt on a table in a busy cafe are nevertheless extremely concerned about online security.

"Without question, broad shifts in perceptions about Internet security must occur before online purchasing can truly flourish," Cole said.

Privacy (Pages 65–67)

Privacy of information online remains a significant problem for both Internet users and non-users.

"In both the 2000 and 2001 UCLA studies, privacy raises the greatest concern of any issue about the Internet," Cole said. Whether we look at online buying, or the concerns of those who simply access the Internet, concerns about privacy remain at the root of a wide range of issues that affect the Internet.

"How can Internet providers, users and non-users dispel concerns about online privacy?" Cole asks. "The answer to that question is not clear — nor is it yet on the horizon."

Regarding privacy:

When asked if "people who go online put their privacy at risk," more than half (56.5 percent) of Internet users and nearly three-quarters (74.5 percent) of non-users agree or strongly agree.

94.5 percent of all respondents express some concern about the privacy of their personal information when or if they buy online.

When users are asked why they wait as long as 23 months to make their first online purchase, concern about fraud and deception rank among the top reasons.

10 percent of non-users who were once users cite "privacy concerns" as a reason why they stopped using the Internet entirely.
Television: Viewing declines (Pages 32, 76 and 78)

By every measure reported in the UCLA Internet Project, television is the primary victim of the growth of the Internet.

"Without question, Internet users are 'buying' some of their time to go online from the time they used to spend watching television," Cole said. "The only social activity in American households that suffers significantly as a result of Internet use is time spent watching television."

Among the responses to several questions that relate to television viewing:

The study found that Internet users have substantially more types of media than non-users. The only media used more by non-users than users is television.

The biggest gap in media use between non-users and users is in their television viewing time. Internet users watch 4.5 hours per week less television than non-users. And television viewing decreases as Internet experience increases.

23 percent of adults report that children in their households now watch less television than before they started using the Internet.

Most Internet users report that they spend about the same amount of time on non-computing activities at home as they did before they had the Internet. Television viewing, however, showed a large decline.

New Internet users, very experienced users and non-users all report about the same amounts of time involved in activities with others in their household, such as time together having an evening meal, playing games or playing sports with other members of the household.
However, non-users report the highest level of group television viewing (10 hours per week), which declines for new users (9.4 hours per week), and drops substantially for users with more than five years of Internet experience (6.7 hours per week).

Media and sexual content (Page 35)

A new question in the 2001 study asks about the amount of sexual content on television, in movies and on the Internet. Large percentages of respondents say that at least half of the subject matter found in all three media contains too much sexual content.

Respondents who say half or more of the subject matter has too much sexual content totaled 82.4 percent for movies, 80.5 percent for television and 61.9 percent for the Internet.

Non-Users: Why not online? (Pages 26 and 28)

The primary reason why the 27.7 percent of Americans say they are not online is "no computer" or "lack of access to an adequate computer." The number of Americans not interested in using the Internet has declined to 21.4 percent of non-users, down from 33.3 percent in 2000.

Of respondents who are not online, 44.4 percent say they expect to go online within 12 months, up from 40 percent in 2000.

Children and the Internet (Pages 75–81)

When adults are asked about the children in their household and their use of the Internet:

Time online — 88.2 percent say children in their household spend about the right amount of time or too little time online, down slightly from 89.2 percent in 2000.

Grades — 96.5 percent say children's grades stay about the same or improved since using the Internet, about the same as in 2000 (96.7 percent).

Time with friends — 91.8 percent say children spend the same amount of time or more time with friends, down marginally from 93 percent in 2000.

Both users and non-users agree at nearly identical levels that children can gain access to "a lot of inappropriate material" on the Internet. On a scale of 1 (strongly disagree) to 5 (strongly agree), users' responses averaged 4.2 and non-users' responses averaged 4.3.
E-mail (Pages 56–58)

Although complaints about bulging e-mail inboxes may seem a common office problem, large majorities of users in 2000 and 2001 do not think that e-mail requires too much time.

Growing numbers of users say that e-mail helps them communicate with people they could not normally connect with otherwise.

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The UCLA Center for Communication Policy created and organizes the World Internet Project, which includes the UCLA Internet Report and similar studies in countries including China, France, Germany, Hong Kong, India, Iran, Italy, Japan, Korea, Macao, Singapore, Sweden and Taiwan.

The UCLA Internet Project is supported by public foundations and private companies, including the National Science Foundation, America Online, Microsoft, Disney, Sony, Verizon, Pacific Bell, DirecTV, Merrill Lynch and the National Cable Television Association.

To download the full text of the UCLA Internet Report, visit www.ccp.ucla.edu.

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