Europe Who...?

Forbes recently published an article entitled Europe: The Next Internet Frontier. It offered a country-by-country ranking with some interesting data.

Like what? Like this:

• The majority of web surfers are American, but the US share shrinks each year and is expected to dip below 50 percent for the first time soon.
• Outside North America, Europe is the fastest-growing and most interesting market for Internet development because of the strength in numbers. Western Europe has roughly 390 million people versus 270 million in the US.
• The most promising Western European market primed for Internet investments is the UK, based on technology penetration (computers, Internet, phone lines), state of economy, government taxation/regulation, online connection charges, credit card usage, and other qualitative measures.
• Scandinavia’s technology infrastructure beats the UK’s. But the Nordic countries are too small to offer economies of scale.
• Germany was dismissed as disappointing.
• The lack of Internet development in economically advanced countries such as France, Belgium, Austria and Italy is nothing less than astounding.
• Europe’s southernmost countries — Spain, Portugal and Greece — do not have the infrastructure in place to support large-scale Internet development.

Forbes Ranked Countries

A- U.K.
B+ Sweden, Finland, Denmark, Netherlands
B Norway, Switzerland
B- Germany, Ireland
C+ France, Belgium, Austria
C Italy
D+ Spain
D Greece, Portugal

Forbes Analysis Of Wired Europe

VITAL STATS	Europe Avg.	US
Percent of people online	6%	16%
PCs per 1000	352	580
Cost to get online	$49.32	$34.87
Annual disposable income	$14,801	$21,928
Credit/Debit cards per 1000	39.31	148

Source: Forbes, 3/29/99

So what’s this all mean?

I believe Forbes was unduly optimistic on European Internet development and I find its rankings to be misguided.

The major difference between the US and Europe is that local calls are generally free in the US, making a massive difference, not only in Internet usage figures, but also in how the Internet is used.

I have always maintained that Europe is so far behind in its use and understanding of the web that it’s not worth exploiting. The question is: Has the situation changed? Is Forbes right in pointing to Europe as a ripe opportunity. Or is this fruit still green?

Where We Are Now

The EU concentrates its energies on how to tax Internet business when there is hardly much worth taxing. The US, in contrast, generally agrees that it is more important to allow fledgling web businesses to grow.

Europe remains mired in over-regulated, over-protected and inefficient economies with high unemployment, without a clue on where to go from here. The US, in contrast, is booming with low unemployment and a buoyant economy largely driven by the growth and the promise of the Internet new frontier.

Unable to see what is as clear as the nose on their uncomprehending faces, the Eurocrats insist that the Internet is a bubble set to burst any minute. They have predicted time and again that the US economy is a mirage that will vanish under the influence of a stock exchange crash — first, the Asian crisis, followed by the Russian collapse, then South America.

When none of this happened, they sighed that the valuations of Internet companies are exposing the US economy to great dangers. And as those valuations continue to move forward (albeit they are high), they speculate that the Opec oil crunch will finally put a stop to American growth.

The above beliefs allow the Eurocrats to remain complacent and more focused on taxing and regulating the Internet instead of finding ways to stimulate Internet growth by reducing telecommunication costs. Not only that, the Europeans are great planners and believe in centralized control with a passion. That is the antithesis of what the Internet is about. Thus, European bureaucrats have some significant cultural barriers to cross.

What no one in Europe seems to be aware of is the fact that the Internet has launched a new industrial revolution. One that is creating a new form of colonialism and empire building. When Europe belatedly arrives at the Internet age, they will find all the hot properties and skill sets are in US ownership.

The Americans, who are busy building Internet infrastructure, are completely unaware of the European colony they are building. I suspect Europe does not even enter into their thoughts. But after saturating the US market, and as Internet usage fully matures in the US, thoughts will turn to Europe. And Europe will fall into its lap like a ripe plum.

I am willing to bet that in 10 years time, the major European Internet sites and facilities and infrastructures will all belong to US corporations. Why indeed should it be any different from the hardware and software market? All of this was pretty plain to me three years ago, when I began to predict this pattern of events.

The Question Of Ranking

Contrary to Forbes’ opinion, I believe Germany is more important that the UK at the moment. To place it behind a half-dozen European countries is wrong for reason of numbers if nothing else. I also suspect that France may surprise us all in the next year or two.

France is culturally very receptive to new technology (far more so than the UK). Most importantly, it already has what was the world’s first public network, Minitel. This gives it the largest population already attuned to making electronic purchases. Up until now, Minitel has proved to be an impediment. It paid the price for being first. The realization has arrived that Minitel is now doomed for the wastebin of history.

As a result, we could well see a massive movement from old Minitel sites to new Internet sites. Combine that with lower telecommunications costs instituted because of public protest, and France could well take off and leave most other European countries behind.

Entrepreneurial Vantage Point

The web is a world-wide system that knows no borders. For example, my company happily runs a business out of London that relies on US clients for a major part of its revenues.

We run a banner network with 24,000 (mainly US) members. For the last year we have been accepting non-USA sites as members. In the long term, we will spin off networks in all countries when they are ready for it.

A couple of months ago, we deemed Germany to be the first European country to be worthy of our commercial attention. We had 500 German sites registered and one substantial US advertiser wanting to target that market. We spun off a German network. In two months it has grown to over 1,000 members, we have gained two German advertisers and are about to add another five.

There is a small emerging Internet market in Germany, but we would never have started there. Our technology, skill sets, and experience all come from playing in a bigger market. There is no way we could have grown as we have, had we started with any European country as our target market.

In my view, that progression will be repeated again and again as US-based companies begin to pay attention to Europe. It is far harder to grow an Internet business based on European traffic, so any entrepreneur would be advised to look right now to the US first.

For someone with an existing property, there may be some sense in extending into some European countries as they grow. But for anyone else, there is plenty of time to think about Europe when the Europeans eventually wake up and smell the (American) coffee.