europe e-commerce: b2b & b2c june 2002...v total e-commerce 103 vi b2b e-commerce 109 vii b2c...

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Europe E-Commerce:B2B & B2C

June 2002

This report is the property of eMarketer, Inc. and is protected under both the United States Copyright Act and by contract.Section 106 of the Copyright Act gives copyright owners the exclusive rights of reproduction, adaptation, publication,performance and display of protected works.

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©2002 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission.Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information.

3


Table of Contents 3

Methodology 7

The eMarketer Difference 8

The Benefits of eMarketer’s Aggregation Approach 9

“Benchmarking” and Projections 9

I Introduction 11

II Population and Economy 15

A. Population 18

Age Distribution 18

B. Economy 20

III Technology Spending 25

A. Leading Countries 27

B. Spending Forecasts by Sector: IT Spending 31

C. Spending Forecasts by Sector: Telecommunications Spending 36

D. Spending Forecasts by Sector: PC and PDA Spending 40

PCs 40

PDAs and Other Handheld Devices 44

E. Spending Forecasts by Sector:

E-Business/Internet Technology Spending 49

IV Technology Infrastructure 53

A. Telecommunications 54

Fixed-Line Telephones 54

Wireless Telephony 57

B. Broadband 75

Bandwidth Demand 75

Market Perspectives 78

Cable vs. DSL 81

C. Internet Access Devices 85

Personal Computers (PCs) 85

Televisions (TVs) 90

PDAs and Other Internet Access Devices 93


4


D. Internet Infrastructure 95

Network Capacity 95

Internet Hosts 96

Internet Service Providers (ISPs) 99

V Total E-Commerce 103

VI B2B E-Commerce 109

A. Revenue Forecasts 111

E-Commerce in Eastern Europe 113

B. Stage of E-Business Development 114

C. Use of E-Business Software and Services 134

Enterprise Resource Planning (ERP) and E-Logistics 134

Customer Relationship Management (CRM) 136

Application Service Providers (ASPs) 136

D. Participation in Online Exchanges 143

Leading European Exchanges 149

VII B2C E-Commerce 153

A. Market Growth Factors 154

B. Revenue Forecasts 155

Comparative Estimates 157

C. 2001 Holiday Shopping 166

D. Online Buyers 169

Buyer Demographics 177

E. Category Review 183

Travel 185

Other Retailers 187

VIII M- and T-Commerce 189

Index of Charts 197

June 2002

Welcome to eMarketer

Dear Reader:

eMarketer’s June 2002 Europe E-Commerce: B2B & B2C Report,TM

a companion to the May 2002 EuropeOnline: Access, Demographics and Usage Report,

TMprovides a comprehensive overview of online

retailing and e-business in Europe, with a focus on the 12 countries eMarketer considers “core” to theregion’s internet markets. The report provides easily accessible answers to the following key questions:

■ How much European corporations are spending on key internet-related technologies and whatare the growth trends in technology spending?

■ What is the level of e-business development in European companies and to what extent are theyparticipating in online marketplaces?

■ What are the demographic characteristics of Europe’s online shoppers?■ What are the most popular retail categories among European internet users?

To prepare this report, eMarketer has drawn on the latest research from government and internationalstatistical agencies as well as dozens of leading research firms, including AMR Research, ForresterResearch, the International Data Corporation, Jupiter Media Metrix and the Yankee Group. Combinedwith eMarketer’s latest projections and analysis, this report will provide readers with the necessaryinformation to make informed decisions about Europe’s large online consumer and business-to-business markets.

While the report includes the critical data for succeeding in the online marketplace in Europe,eMarketer’s eStat Database contains thousands of additional statistics on virtually every aspect of theinternet and e-business. Readers may wish to consult both resources to get a more complete picture ofthe internet in Europe and around the world.

If you have any questions or comments concerning eMarketer or any of the material in this report,please call, fax or e-mail us.

Noah Elkin and Nevin CohenSenior Analysts

Reuse of information in this document, without prior authorization,is prohibited. If you would like to license this report for yourorganization, please contact David Iankelevich [email protected], or 212.763.6037.

Written by Noah Elkin and Nevin Cohen

Also contributing to this report:Steve Butler, senior analystYael Marmon, researcherAndrew Raff, researcherTracy Tang, researcherAllison Smith, senior editorDana Hill, data entry & production assistant


5


Nevin CohenSenior Analyst, [email protected]

Noah ElkinSenior Analyst, [email protected]

eMarketer, inc.821 BroadwayNew York, NY 10003T: 212.677.6300F: 212.777.1172

Methodology 7

The eMarketer Difference 8

The Benefits of eMarketer’s Aggregation Approach 9

“Benchmarking” and Projections 9

I Introduction 11








Index of Charts 197


7


eMarketer’s approach to market research is founded on a philosophy ofaggregating data from as many different sources as possible. Why? Becausethere is no such thing as a perfect research study and no single researchsource can have all the answers. Moreover, a careful evaluation andweighting of multiple sources will inevitably yield a more accurate picturethan any single source could possibly provide.

The eMarketer DifferenceeMarketer does not conduct primary research. Neither a research firm nor aconsultancy, eMarketer has no testing technique to defend, no research biasand no client contracts to protect.

eMarketer prepares each market report using a four-step process ofaggregating, filtering, organizing and analyzing data from leading researchsources worldwide.

Using the internet and accessing a library of electronically-filed researchreports and studies, the eMarketer research team first aggregates publiclyavailable e-business data from hundreds of global research and consultancyfirms. This comparative source information is then filtered and organizedinto tables, charts and graphs. Finally, eMarketer analysts provide conciseand insightful analysis of the facts and figures along with their ownestimates and projections. As a result, each set of findings reflects thecollected wisdom of numerous research firms and industry analysts.

“I think eMarketer reports are extremely useful andset the highest standards for high quality,objective compilation of often wildly disparatesources of data. I rely on eMarketer’s researchreports as a solid and trusted source.”— Professor Donna L. Hoffman, Co-Director, eLab, Vanderbilt University

www.eMarketer.com©2001 eMarketer, Inc.

Analyze

Aggregate

Filter

Organize


8


Methodology

Introduction

Population and Economy

Technology Spending

Technology Infrastructure

Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

The Benefits of eMarketer’s AggregationApproachObjective: information is more objective than that provided by any singleresearch sourceComprehensive: gathered from the world’s leading research firms,consultancies and news organizationsAuthoritative: quoted in leading news publications, academic studies andgovernment reportsAll in one place: easy to locate, evaluate and compareReadily accessible: so you can make quick, better-informed businessdecisionsAbove the hype: accurate projections that business people can use withconfidenceTime saving: there’s no faster way to find internet and e-business stats,online or offMoney saving: more information, for less, than any other source in theworld

“Benchmarking” and ProjectionsUntil recently, anyone trying to determine which researcher was mostaccurate in predicting the future of any particular aspect of the internet didnot have a definitive source with which to do this. For instance, over 10firms predicted e-commerce revenues for the fourth quarter 1998 onlineholiday shopping season, and yet no single source could be identified afterthe fact as having the “correct” number. In the Spring of 1999, however, theUS Commerce Department finally began measuring e-commerce B2Cactivity so business people and others could have a benchmark with whichthey could compare and evaluate projections.

eMarketer has adapted its methodology to recognize that certaingovernment and other respected, impartial sources are beginning toprovide reliable numbers that can be consistently tracked over time. Mostof these established sources, however, only measure past results; typically,they do not make predictions.


9


Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts


10


Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

Today, eMarketer formulates its Essential E-Business Numbers by firstidentifying the most established, reputable source for a given sector beingmeasured and then adopting that organization’s figures as benchmarks forthe historical/current period. For instance, eMarketer’s US internet userfigures will be based on a combination of the most recent data from the USCensus Bureau (August, 2000 survey) and the InternationalTelecommunication Union (ITU). Using this data as the benchmark for2000, eMarketer will make projections for subsequent years based on thefollowing factors:

■ a comparative analysis of user growth rates compiled from otherresearch firms

■ additional benchmark data from internet rating firms, e.g.,Nielsen//NetRatings and Jupiter Media Metrix, which use panels tomeasure internet user activity on a weekly and monthly basis

■ an analysis of broader economic, cultural and technological trends inthe US

Similarly, US e-commerce revenues are being “benchmarked” usinghistorical data from the US Department of Commerce, and broadbandhousehold and penetration rate forecasts are being built off baseline datafrom the Organization for Economic Cooperation and Development (OECD).

Through this benchmarking process, eMarketer will be holding itself –and our projections – accountable.

“When I need the latest trends and stats on e-business, I turn to eMarketer. eMarketer cutsthrough the hype and turns an overabundance ofdata into concise information that is sound anddependable.”— Mark Selleck, Business Unit Executive, DISU e-business Solutions, IBM

IMethodology 7

I Introduction 11








Index of Charts 197


11



12


Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

eMarketer’s May 2002 Europe Online Report,TM

a companion to this report,highlighted the ongoing growth in Europe’s online population and itsexpansion to new national and demographic segments. With an estimated144.4 million users at year-end 2001, Europe now constitutes the world’ssecond largest regional internet market, just behind Asia-Pacific and justahead of North America.

E-commerce in both the business and consumer segments has continuedto advance despite the less-than-positive economic climate that prevailedacross the region in the latter part of 2001 and the early months of 2002.Positive figures from the 2001 holiday shopping season attest to the factthat online retailing remains alive and well in Europe. A number of factorswork in favor of retail e-commerce in Europe. In particular, the regionboasts an advanced telecommunications infrastructure, including theworld’s largest population of wireless users, a growing cadre of digitaltelevision subscribers and rising PC penetration rates. As such, Europeanconsumers enjoy a broad range of devices from which to make purchaseson the internet.

Likewise, European businesses continue to invest in internet-enabledsolutions in an effort to further automate and streamline their internal andexternal operations. In addition, there is growing evidence that Europeanfirms are highly enthusiastic about internet-based trading exchanges.Moreover, despite the common misgivings among European businesses thatthey lag their North American counterparts in terms of technologyadoption, several studies cited in the report have found that Europeancompanies are in fact closing the technology gap with the United States.

A thorough understanding of the demographic characteristics, usagepatterns and category preferences of Europe’s online shoppers can helpmarketers, retailers and business decision-makers better target theirresources. For example, the report points out that consumer attitudes willhave to go through a sea change if internet retailers and mobile operatorshope to realize the lofty m-commerce revenue estimates that manyresearch firms have released, particularly in light of the fact that mobileinternet use remains quite modest throughout Europe.

This report adds comprehensive details about European businesses’ useof the internet for both internal processes and external operations. Inessence, it offers readers a statistical portrait of the region’s leadingindustries, sectors and companies, thereby locating the opportunity for e-business consultancies, software application providers and outsourcingconcerns. Specifically, this report will outline the following:

■ How much and in what areas are European businesses investing ininformation and communication technology and e-business solutions?

■ What are the prospects for online marketplaces and trading exchangesin Europe?

■ What is the demographic profile of Europe’s online shoppers and howis this expect to evolve?


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Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

■ How and why consumers make purchases on the internet?■ What are the important trends to watch?

Additional findings of the June 2002 Europe E-Commerce: B2B & B2CReport

TMinclude:

■ Total e-commerce revenues in Europe are expected to reach $169.81billion by the end of 2002.

■ A digital divide, borne out by the level of both technology investmentand e-commerce spending by consumers and business, continues toexist between the more developed countries of Western Europe and theemerging economies of Eastern Europe.

■ Europe’s increasing economic unification is likely to facilitate cross-border e-commerce transactions for business and consumers,particularly those in the Euro-zone.

■ European consumers consider better prices to be their main motivatingfactor for buying online, unlike US consumers, who typicallyemphasize convenience.

■ M-commerce, although tantalizing in the possibilities it may somedayoffer, remains an elusive goal of internet marketers in Europe.

IIMethodology 7

I Introduction 11


A. Population 18

B. Economy 20







Index of Charts 197


15



16


Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

This report analyzes e-business practices in both the retail and business-to-business segments in Europe, with particular attention to the following12 “core” countries: Denmark, Finland, France, Germany, Italy, theNetherlands, Norway, Poland, Russia, Spain, Sweden and the UnitedKingdom (UK). eMarketer considers these twelve countries to be the mostcritical internet markets in the region.

In the aggregate, however, eMarketer defines the region of Europe morebroadly than these twelve core countries. In eMarketer’s analysis, Europeencompasses not only the countries that belong to the European Union, butalso all of Eastern Europe and Russia, as well as the Baltic nations and theCommonwealth of Independent States. Consequently, for comparisonpurposes, the report will include some data for non-core countries,particularly statistics obtained by the European Union and otherinternational bodies. Many research firms, for example, focus exclusivelyon the Western European market, simply because it is the region’s largestand presents the greatest immediate opportunities. The report will note thiswherever necessary, but inasmuch as the data allow, it will provide anassessment of the possibilities offered by Europe’s less developed markets.

Economic, technological, linguistic and cultural differences amongEuropean nations have led to tremendous variations in the rates of internetuse and e-commerce throughout the region. Of the four largest WesternEuropean nations, Germany and the UK have the most advanced interneteconomies. However, there is increasing evidence that internet use inFrance, long considered a laggard in technology deployment and usageamong the European economic powerhouses, is growing rapidly. TheNordic countries already have highly developed internet markets, but withtheir small populations, these will soon reach a saturation point. Russia’spoor economic health has kept its internet market relatively

Core European CountriesDenmark

Finland

France

Germany

Italy

Netherlands

Norway

Poland

Russia

Spain

Sweden

UK

Source: eMarketer, 2001

033237 ©2001 eMarketer, Inc. www.eMarketer.com


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Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

underdeveloped, as has the economic condition of much of Eastern Europeand the former Soviet countries. However, nations with more robusteconomies, such as Poland, Hungary, the Czech and Slovak Republics andeven Estonia have been able to make significant strides in internet and e-business development.

The following overview of Europe’s population and the region’s recenteconomic performance will set the stage for the remainder of the report.The demographic and economic profile will help marketers, retailers andbusiness decision-makers to understand the context for e-business inEurope as well as its prospects in the years ahead. Consequently, they willbe better able to target their resources accordingly.

For a detailed view of Europe’s internet user population, whichincludes data on usage trends and demographics, readers may wish toread eMarketer’s May 2002 Europe Online Report.TM To order copies,visit the eMarketer website (http://www.emarketer.com) or send an e-mail to [email protected].

http://www.emarketer.com


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Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

A. PopulationEurope’s 803.7 million inhabitants, divided between Western and EasternEurope, represent 13% of the world’s total population. Western Europe hasa population of nearly 393 million people, with eMarketer’s core WesternEuropean nations accounting for just about 340 million inhabitants. As apotential market, Eastern Europe (including Russia, the Baltics, and thecountries of the former Soviet Union) is formidable in sheer size, if not ineconomic strength. With nearly 412 million people, the region has a largerpopulation than Western Europe. Russia’s 146 million citizens exceed thepopulations of Germany and the UK combined.

Age DistributionYoung people constitute a significant block of both current and futureinternet users. At present, European children, teens and young adults maynot have the same purchasing power nor the same ability to secure credit asadults, but they are voracious consumers of new technology, as evidencedby their widespread use of wireless short messaging.

Many countries in Europe have populations with age distributionscomparable to those of the United States and Japan. For example, 35% ofAmericans and 27% of Japanese are 24 or younger, while the figures forFrance, Germany and the UK, Europe’s largest internet markets, are 32%,27% and 31%, respectively. By contrast, Latin America, home to the world’sfastest growing internet user population in the past two years, is asignificantly younger region. For example, 48% of Brazilians and 44% ofArgentines are 24 and under, and in the Mexico, fully 63% of thepopulation is less than 30 years old.

Age Breakdown of Selected European Countries, 2002

Denmark

29.7%

36.1%

34.2%

Finland

30.4%

34.5%

35.1%

France

31.5%

35.4%

33.1%

Germany

26.9%

37.4%

35.7%

continued on page 19


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Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

Italy

24.9%

38.1%

37.0%

Netherlands

30.1%

38.0%

31.9%

Norway

31.9%

35.9%

32.1%

Spain

27.7%

38.6%

33.7%

Sweden

29.6%

33.8%

36.6%

United Kingdom

31.1%

35.7%

33.2%

Poland

34.7%

36.5%

28.8%

Russia

32.8%

37.8%

29.4%

0-24 25-49 50+

Source: eMarketer calculation based on US Census Bureau data, 2002



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Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

B. EconomyThe European economy grew steadily throughout much of 2000, butgrowth slowed considerably over the course of 2001, as the region began tofeel the effects of the worldwide economic downturn. Gross domesticproduct (GDP) increased at a rate of just 1.4% in 2001, according to UK-based Barclays Capital. The bank predicts even slower GDP growth in 2002in the 12-nation euro-zone−0.4%, including negative quarter-over-quartergrowth in the first two quarters of this year.

Moreover, figures released by the Organization for EconomicCooperation and Development (OECD) indicate that per capita GDP in theEU has slipped in relation to the US, falling from 77% of the US level in1990 to 70% in 2000. The precipitous deployment of technology in the USin the 1990s may in part explain its more rapid growth relative to Europe,where the implementation of web-based solutions in both homes andoffices has been uneven. Recovery of the region’s economy is anticipated tobegin in the second quarter of this year and gain steam in 2003.

Euro-Zone Gross Domestic Product (GDP) GrowthRates, 2001-2003 (in % growth per year)

2001 1.4%

2002 0.4%

2003 2.3%

Source: Barclays Capital, December 2001



21


Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

Europe saw a steady slowing of economic growth in 2001 in both year-over-year and quarter-over-quarter terms. According to European Unionfigures, real GDP growth in the euro-zone declined by 0.2% in the fourthquarter of 2001, bringing year-to-year growth down to 0.6% (from 2.8% inthe fourth quarter of 2000 and 3.6% in the same period in 1999).

Gross Domestic Product (GDP) Growth Rates for theEuro-Zone and EU-15, Q1 1999-Q4 2001% change over theprevious quarter

Euro-zone

0.9%

0.6%

1.1%

1.0%

0.9%

0.9%

0.4%

0.6%

0.5%

0.1%

0.2%

-0.2%

EU-15

0.8%

0.6%

1.1%

1.0%

0.8%

0.9%

0.5%

0.6%

0.5%

0.1%

0.2%

-0.1%

Q1 1999

Q2 1999

Q3 1999

Q4 1999

Q1 2000

Q2 2000

Q3 2000

Q4 2000

Q1 2001

Q2 2001

Q3 2001

Q4 2001

% change over thesame quarter of theprevious year

Euro-zone

2.0%

2.2%

2.8%

3.6%

3.6%

3.9%

3.2%

2.8%

2.4%

1.6%

1.4%

0.6%

EU-15

2.0%

2.2%

2.7%

3.5%

3.5%

3.8%

3.2%

2.8%

2.5%

1.7%

1.5%

0.8%

Note: Euro-zone includes Austria, Belgium, Finland, France, Germany,Greece (from the first quarter 2001 onwards), Ireland, Italy, Luxembourg,the Netherlands, Portugal and SpainSource: Eurostat, Statistical Office of the European Commission, 2002



22


Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

Although the economic performance of the EU-15 and euro-zone wasrather desultory in 2001, including drops in investments, foreign trade andindustrial production, it nonetheless outpaced the US and Japan. The latterremains mired in recession, while the US saw its GDP negatively affected inthe third quarter due in large part to the fallout of the 11 September 2001terrorist attacks.

Gross Domestic Product (GDP) Growth Rates forEurope, the US and Japan, 2000 & 2001

3.3%

1.5%

3.3%

1.6%

4.1%

1.2%

Euro-zone

EU-15

US

Japan

2.4%

-0.5%

2000 2001



Gross Domestic Product (GDP) Growth Rates forEurope, the US and Japan, 2001% change over the previous quarter

Q1 Q2 Q3 Q4

Euro-zone 0.5 0.1 0.2 -0.2

EU-15 0.5 0.1 0.2 -0.1

US 0.3 0.1 -0.3 0.3

Japan 1.0 -1.2 -0.5 -1.2

% change over the same quarter of the previous year

Q1 Q2 Q3 Q4

Euro-zone 2.4 1.6 1.4 0.6

EU-15 2.5 1.7 1.5 0.8

US 2.5 1.2 0.5 0.4

Japan 1.4 -0.6 -0.5 -1.9




23


Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

The failure of many dot-com firms has also helped to quell corporateenthusiasm for investments in information technology, while negativelyaffecting business confidence and contributing to a contraction in thegrowth of manufacturing investment. Over-investment in next-generationtelecommunications technology that has failed to bear its promised fruithas also weakened investor confidence in Europe’s economy.

Online advertising revenue, e-commerce purchases, and expansion ofsupporting infrastructure may also diminish as businesses scale backtechnology investments and equipment manufacturers continue to contractand consolidate. Investments in the euro-zone dropped 0.8% in the fourthquarter of 2001, after falling 0.3% in the third quarter.

Quarter-over-Quarter Gross Domestic Product (GDP)Growth Rates in Selected European Countries, Q12000-Q4 2001

Austria

Belgium

Denmark

Finland

France

Germany

Italy

Netherlands

Norway

Spain

Sweden

Switzerland

UK

Austria

Belgium

Denmark

Finland

France

Germany

Italy

Netherlands

Norway

Spain

Sweden

Switzerland

UK

Q1 2000

0.4%

0.2%

-0.2%

2.1%

0.8%

1.0%

0.8%

0.8%

0.5%

1.2%

0.8%

0.7%

0.4%

Q1 2001

0.9%

0.2%

-0.6%

0.0%

0.4%

0.4%

0.8%

0.0%

0.3%

1.0%

0.4%

0.4%

0.6%

Q2 2000

0.7%

1.0%

1.6%

0.9%

0.9%

1.2%

0.3%

0.6%

-0.6%

1.0%

1.2%

0.5%

1.1%

Q2 2001

-0.6%

-0.5%

0.3%

-1.8%

0.2%

0.0%

0.0%

0.3%

0.3%

0.2%

0.0%

0.1%

0.5%

Q3 2000

0.3%

0.8%

0.3%

1.6%

0.6%

0.1%

0.5%

0.5%

0.7%

0.4%

0.6%

0.6%

0.7%

Q3 2001

-0.3%

0.0%

0.5%

1.4%

0.5%

-0.2%

0.1%

0.0%

1.0%

0.9%

0.1%

-0.1%

0.4%

Q4 2000

-0.4%

0.9%

0.7%

0.7%

1.0%

0.2%

0.8%

0.7%

0.3%

0.8%

0.3%

0.6%

0.5%

Q4 2001

0.1

-0.2%

0.1%

-0.5%

-0.1%

-0.3%

-0.2%

0.0%

0.2%

0.2%

0.3%

0.0%

0.0%

Source: Organization for Economic Cooperation and Development (OECD),2002



24


Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

Countries in Central and Eastern Europe have not been as directly exposedto the effects of the US economic downturn, in large part because they arenot well integrated into the US economy. Approximately 75% of thisregion’s exports are to Western Europe, while sales to the US account foronly 2.6% of the region’s GDP. Moreover, the economies of Central andEastern Europe depend relatively little on telecommunications ortechnology manufacturing, so the slowdown in IT sales has not had asignificant negative impact. Nevertheless, if economic conditions inWestern Europe worsen, the economies of Central and Eastern Europeancountries will weaken further.

IIIMethodology 7

I Introduction 11



A. Leading Countries 27

B. Spending Forecasts by Sector: IT Spending 31

C. Spending Forecasts by Sector: TelecommunicationsSpending 36

D. Spending Forecasts by Sector: PC and PDA Spending 40

E. Spending Forecasts by Sector:E-Business/Internet Technology Spending 49






Index of Charts 197


25



26


Methodology

Introduction


Technology Spending


Total E-Commerce

B2B E-Commerce

B2C E-Commerce

M- and T-Commerce

Index of Charts

Broadly speaking, the information and communication technology (ICT)infrastructure comprises fixed-line, broadband and wireless transmissionof voice and data as well as the hardware, software applications, equipmentand services required to conduct e-business. The level of ICT spending anddevelopment in Europe has a direct bearing on the prospects for bothconsumer and business-to-business e-commerce in the region. This chapterfocuses on those technologies and devices that consumers and businessesuse to make transactions online.

The state of development of the ICT infrastructure must be considered inthe context of the global economic downturn, which hit full stride in 2001,dampening both enthusiasm for and investment in ICT. Although the ICTsector in Europe managed to overcome the backlash associated with theexorbitant fees telecommunications companies paid for third-generationwireless licenses and is currently the world’s second-largest region in ICTspending, a February 2002 report by the European Information TechnologyObservatory (EITO) indicates that Western Europe (represented by the EU-15 plus Switzerland and Norway) lags well behind the US in thedeployment of key communications technologies.

Japan12%

Rest of world25%

Europe29%

US34%

Information and Communication Technology (ICT)Market Worldwide, by Region, 2002

Note: Based on market value of €2.442 trillionSource: European Information Technology Observatory (EITO), February2002



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A. Leading CountriesGermany, the UK and France heavily dominate the European ICT market.However, figures from the European Commission show that other countriesin the region invest a greater portion of GDP on ICT innovation andresearch. Overall, the region’s ICT markets will continue to grow in 2002-2003, although below the worldwide average.

Forrester Research, in a report issued in March 2002, predicted that theUK IT market would post the most robust recovery in 2003 to becomeEurope’s largest IT market. Germany will fall to second place in ITexpenditure, followed by France and Italy. The research firm maintains thatas a result of economic stagnation throughout 2001, IT spending inGermany will not recover to 2000 levels until 2005. The European with thegreatest IT growth potential is Spain: Forrester projects it will achievedouble-digit growth rates after 2003.

An important trend, one not recorded by EITO, which focuses on WesternEurope, concerns ICT spending growth in Eastern Europe. According toDigital Planet 2002: The Global Information Economy, a report released inFebruary 2002 by the World Information Technology and Services Alliance(WITSA), Eastern Europe saw greater increases in ICT expenditures in 2001than North America, Latin America, the Middle East and Africa combined.This trend, should it continue, augurs well for an eventual leveling of thetechnology base across Europe as a whole.

Rest of WesternEurope

21%

Netherlands5%

Spain6%

Italy11% France

15%

UK21%

Germany21%

Western European Information and CommunicationTechnology (ICT) Market, by Country, 2002

Note: Based on market value of €678 billionSource: European Information Technology Observatory (EITO), February2002



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The EITO study, conducted on an annual basis, points to a number of keyfactors in the recovery of the European technology sector, among them:

■ Brisk growth in the software and IT services market as businessesdemand technology solutions that integrate internal and externalfunctions

■ More widespread use of the internet by businesses of all sizes■ Ongoing investment in broadband internet access and wireless

communication technologies

Information and Communication Technology (ICT)Expenditure in Selected European Countries, Japanand the US, 1999 & 2000 (as a % of GDP)

1999 2000

Sweden 7.2% 7.4%

Netherlands 6.1% 6.6%

Portugal 6.0% 6.6%

UK 6.3% 6.5%

Spain 5.8% 6.3%

Denmark 5.7% 6.1%

France 5.5% 6.1%

Greece 5.3% 6.0%

Finland 6.0% 6.0%

EU-15 5.6% 6.0%

US 6.5% 5.9%

Austria 5.4% 5.8%

Germany 5.2% 5.7%

Belgium 5.2% 5.6%

Italy 4.8% 5.3%

Norway 5.4% 5.2%

Ireland 4.9% 4.8%

Japan 4.1% 4.3%

Source: Eurostat, Statistical Office of the European Commission, 2002



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The International Data Corporation (IDC) believes that part of the recoverywill stem from increased European government spending on IT and webservices for both citizens and businesses, particularly as the public sectorlooks to put education, health and other government-sponsored operationsonline. The impact of public sector spending is considerable: IDC estimatesEuropean government spending on IT services accounts for around 18% ofthe total market, while e-government initiatives represent approximately6% of total services spending. By 2005, IDC expects that figure to double,while growing into a $4 billion market.

Although EITO expects the recovery to gain momentum in 2003, growthrates for the ICT market will not begin to approach the levels of 1998-2000,when they reached well into the double-digits. In its March 2002 report,Forrester attributes the flat IT growth curve to a number of factors, amongthem low internet penetration across the region and sluggish populationincreases. With many operators and equipment manufacturers saggingunder the weight of crushing debt loads, it is safe to assume that bothcorporations and governments alike will be more cautious in their effort todigitize the European economy.

Annual Growth Rates for Western EuropeanInformation and Communication Technology (ICT)Market, by Segment, 2001-2003

-2.4%

0.6%

6.3%

8.0%

8.9%

13.0%

8.0%

8.5%

9.8%

9.5%

6.7%

6.4%

Total ICT equipment

Software products

IT services

Carrier services

Total ICT

5.1%

5.4%

7.8%

2001 2002 2003

Source: European Information Technology Observatory (EITO), 2002



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Annual Growth Rates for Information andCommunication Technology (ICT) Market Worldwide,by Region, 2001-2003

WesternEurope

5.1%5.4%

7.8%

US

0.5%

5.1%

9.4%

Japan

5.3%

7.6%7.3%

Rest ofworld

8.7%9.3%

13.8%

World

4.4%

6.6%

9.8%

3

9

15

2001 2002 2003

Note: Based on 2002 market value of €2,442 billionSource: European Information Technology Observatory (EITO), February2002


Value of Western European Information andCommunication Technology (ICT) Market, 2002 (inbillions and as % growth per year)

2000 €612 (13.2%)

2001 €643 (5.1%)

2002 €678 (5.4%)

2003 €731 (7.8%)

Source: European Information Technology Observatory (EITO), 2002



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B. Spending Forecasts by Sector: ITSpendingAbsent the communications component in ICT, the Aberdeen Groupestimates that North America accounted for 40.7% global spending,followed by Western Europe at 24.5%. As noted in the second chart below,Computer Economics offers similar estimates in its break-out of worldwideIT spending by region. The two firms divide the world slightly differently,hence not allowing for a direct, one-to-one comparison of the figures.

IT Spending Worldwide, by Region, 2001 (in billions)

North America $492.29

Western Europe $297.11

Asia-Pacific $251.96

Latin America $67.80

Middle East and North Africa $23.25

Sub-Saharan Africa $7.55

Rest of World $70.83

Total $1,210.80

Source: Aberdeen Group, May 2001


Estimated Worldwide IT Spending, by Region, 2001 (inbillions and as a % of total spending)

US $525.66 (44.4%)

Europe $306.40 (25.9%)

Asia Pacific $252.50 (21.3%)

Latin America $44.45 (3.7%)

Rest of world $56.24 (4.7%)

Total $1,185.24 (100.0%)

Source: Computer Economics, 2001



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Research firms do not expect this breakdown to shift significantly in thenext couple of years. For example, the International Data Corporation (IDC)projects that North America’s share will drop slightly between 2000 and2003, while Western Europe’s portion will rise commensurately.

Worldwide IT Spending, by Region, 2000 & 2003 (as a% of world total)

North America

46.7%

45.8%

Western Europe

29.8%

30.5%

Asia Pacific (Mature)

13.6%

12.2%

Asia Pacific (Developing)

4.0%

5.0%

Latin America

3.2%

3.3%

Eastern Europe/Middle East & Africa

2.8%

3.2%

2000 2003

Source: International Data Corporation (IDC), 2000



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IDC has estimated that worldwide spending on IT services will grow at acompound annual growth rate (CAGR) of 12% from 2000 to 2005, to reach$700 billion. In 2001, the United States’ represented a 47% share of theworld market according to IDC, while Western Europe had a 29% share, andwith Japan accounting for 12% of global spending.

IDC expects the US’ share of the worldwide IT services market to remainconstant over the next several years, rising marginally to 48% by 2005. Themarket share for Western Europe and Japan is expected to see modestdeclines to 27.4% and 10.7%, as other regions of the world increase their ITservices spending. The entire IT services market is forecast to grow at aCAGR of 12% between 2000 and 2005, with 11% growth in 2001. The Asia-Pacific region is expected to be the fastest-growing market, increasing at aCAGR of 23% over the next five years.

Breakdown of Worldwide IT Services Market, byRegion, 2001 (in billions)

United States $206.9


Japan $53.2

Rest of world $52.5

Total $440.1



Breakdown of Worldwide IT Services Market, 2005 (inbillions)

US $335.0


Japan $75.2

Rest of World $97.7

Total $700.3




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Not unexpectedly, the leading economies of Europe are the leaders in ITspending as well. In 2001, the United Kingdom accounted for 15.5% ofWestern European IT spending, following Germany at 23.4% and France at15.9%. Taken together, the top five markets for information technologyheld 73.9% of the Western European market in 2001, and will have a 73.1%share in 2005.

Computer Economics has broken down European IT spending in 2001 bycategory, showing that hardware accounted for 42.8% of total ITexpenditures, followed by IT staff at 33.8%. Compared with the UnitedStates, European software spending in 2001 was lower, at 9.0% of totalexpenditures, versus 12.9% in the US.

Information Technology Spending in LeadingEuropean Markets, 2001-2005 (in billions)

2001 2002 2003 2004 2005Spain $18.79 $20.78 $23.07 $25.38 $27.84

Italy $38.44 $41.13 $44.10 $47.20 $50.74

UnitedKingdom

$45.91 $49.81 $54.12 $58.72 $63.86

France $47.14 $51.27 $55.82 $60.85 $66.26

Germany $69.56 $76.33 $83.58 $91.52 $99.99

Source: Aberdeen Group, May 2001


Estimated European IT Spending by Category, 2001 (inbillions and as a % of total spending)

Hardware

$131.11 (42.8%)

Staff

$103.67 (33.8%)

Software

$27.44 (9.0%)

Outside services

$22.84 (7.5%)

Facilities overhead

$12.20 (4.0%)

Consumable supplies

$9.15 (3.0%)

Total

$306.40 (100.0%)

Source: Computer Economics, 2001



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Global Industry Analysts estimates that Germany will account for 23.78%of the European market for IT equipment in 2005, down from its 1999 shareat 24.16%. Nonetheless, it is expected to spend $102.68 billion by then andtake a 7.17% share of the world market. IT equipment spending in Germanyis projected to grow by 5.76% in 2002, down from 6.43% growth in 2001.

The United Kingdom is expected to have a 15.69% share of the EuropeanIT equipment market in 2005, down from its 16.72% share in 1999. At$67.74 billion in spending by 2005, the UK will have a 4.73% share of theglobal market. IT equipment spending in the UK is projected by GlobalIndustry Analysts to slow to 3.98% growth in 2002, down sharply from6.17% growth in 2001.

By 2005, France will account for 14.49% of the European market for ITequipment, falling from its 16.16% share in 1999. France’s share of theglobal market will be 4.37% in 2005. IT equipment spending is expected togrow 4.76% in 2002, down only slightly from 4.79% growth in 2001. Italy’sspending on IT equipment will reach $49.55 billion in 2005, accounting for11.48% of the European market and 3.46% of the world market by then. In1999, Italy represented 11.84% of European IT equipment spending. Themarket is projected to grow by 5.45% in 2002 compared with a growth rateof 6.26% in 2001.


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C. Spending Forecasts by Sector:Telecommunications SpendingWhile most research firms anticipate a slowing of spending growth in thetelecommunications sector, which includes equipment and services, overallspending will nevertheless double in the period between 1999 and 2004according to the Telecommunications Industry Association (TIA).

Telecommunications Spending, by Region, 2000 &2004 (in billions)

2000 2004

US $609.2 $954.0

Western Europe $351.7 $496.0

Asia Pacific $345.4 $717.0

Eastern Europe $102.5 $167.1

Latin America $79.0 $157.1

Canada & Mexico $51.1 $77.6

Total (not US) $1,155.0 $2,099.0

Worldwide Total $1,764.2 $3,052.7

Source: Telecommunications Industry Association, 2001



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As in other regions, European telecom operators have spent billions ofdollars over the last few years in order to shore up their position at home,or to enter newly liberalized markets. The European telecom market is nowthe most competitive in the world, and spending is forecast to continueover the next few years, but at a far less rapid rate than in the past. Theexcessive debt burden created through over-exuberant spending on 3Gwireless licenses is now beginning to bite many European operators,resulting in declining share prices.

Western European Telecommunications Spending, byCategory, 1999-2004 (in billions)

Local networkservices

Network access

Toll service

Wireless services

Total transportservices

Enterprise equipment

Public networkequipment

Total equipment

Total

1999

$63.0

$32.0

$100.1

$40.0

$235.1

$60.2

$19.8

$19.9

$315.1

2000

$66.0

$33.0

$107.0

$53.7

$259.7

$69.6

$22.6

$22.6

$351.7

2001

$69.9

$34.0

$114.6

$66.0

$284.3

$79.9

$25.3

$25.3

$389.6

2002

$73.0

$34.9

$78.4

$90.3

$28.0

$28.0

$122.0

$308.0

$426.7

2003

$76.0

$34.9

$129.6

$90.0

$330.4

$100.4

$30.7

$30.7

$461.4

2004

$79.0

$35.6

$136.6

$101.0

$352.0

$110.8

$33.3

$33.3

$496.0

Source: Telecommunications Industry Association, February 2001



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In contrast to their Western European neighbors, the less-developedEastern European markets, such as Poland, Russia and Hungary are notexpected to grow substantially over the next three years. Public networkequipment will remain a growth area, as basic telephone services are madeavailable to more of the population from the national telecommunicationsoperators. Wireless services are also expected to be a growth area.

Until recently, with the advent of high-bandwidth digital subscriber lines(DSL), many business users have had little in the way of broadband optionsother than leased circuits provided by incumbent telecommunicationsoperators. The high cost of leased lines, which is usually dependent on linelength and bandwidth and independent of usage, has long been the sourceof frustration for business users, particularly given their lack of choice.

An October 2001 Organization for Economic Cooperation andDevelopment (OECD) survey of leased line prices across member countriesindicates that the cost of a 2 Mbps leased line in much of Western Europeand the United States is well below the OECD average. Korea, whichcurrently has the highest penetration of residential broadband of anycountry in the world, seems to have extremely high leased line pricescompared to its OECD counterparts.

Eastern European Telecommunications Spending, byCategory, 1999-2004 (in billions)

Local networkservices

Network access

Toll service

Wireless services

Total transportservices

Enterprise equipment

Public networkequipment

Total equipment

Total

1999

$22.8

$10.9

$31.3

$7.6

$72.3

$14.0

$4.1

$18.1

$90.4

2000

$23.9

$11.3

$33.2

$12.9

$81.1

$16.6

$4.9

$21.3

$102.4

2001

$24.9

$11.9

$35.2

$20.8

$92.7

$18.9

$5.6

$24.3

$116.9

2002

$26.0

$12.3

$37.2

$30.0

$105.6

$21.3

$27.7

$27.6

$133.1

2003

$27.0

$12.9

$39.3

$40.0

$119.1

$24.0

$31.2

$31.2

$150.3

2004

$28.0

$13.2

$41.4

$50.0

$132.7

$26.6

$34.6

$34.6

$167.1

Source: Telecommunications Industry Association, February 2001



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Since 1997, when many European telecom markets began to bederegulated, competition has forced leased line prices down within theEuropean Union. For international traffic out of the EU, bandwidth priceshave fallen at an even faster rate than within the EU.

Annual Rental for National Leased Lines in theEuropean Union, 2000

Average price % changesince 1997

64kbps 2km €2,200 -19%

50km €5,000 -21%

200km €6,500 -24%

2Mbps 2km €8,200 -18%

50km €26,900 -28%

200km €44,400 -32%

Source: European Commission, 2000


Annual Rental for International Leased Lines fromEuropean Union, 2000

Average price % changesince 1997

64kbps Near EU €11,500 -30%

Far EU €18,700 -25%

To US €21,400 -33%

2Mbps Near EU €132,000 -36%

Far EU €227,000 -26%

To US €243,000 -33%

Source: European Commission, 2000



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D. Spending Forecasts by Sector: PC andPDA Spending

PCsThe slowing economy drove down growth in European PC sales in 2001,particularly in the second half of the year. According to estimates from theinvestment bank UBS Warburg, 42% of PC unit sales went to the US marketalone in 2001, while Western Europe lagged behind at 26%. The US andEuropean portion of worldwide PC revenues are in line with their shares ofthe global market: 40% and 25%, respectively. Comparative figures byBanc of America Securities put the US share of global PC revenues at 36.8%in 2001, with Western Europe following at 25.2%.

Latin America4% Rest of

World7%

Asia-Pacific13%

Japan10%

Western Europe 26%

US42%

PC Unit Sales Worldwide, by Region, 2001 (as a % ofglobal market)

Source: UBS Warburg, 2001


PC Market Revenue Forecast Worldwide, by Region,2001 (in billions)

United States $68.4


Japan $21.4

Asia/Pacific $18.1

Rest of World $27.3

Total $180.1

Source: UBS Warburg, 2001



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As demand has decreased in Western Europe’s PC market, competition hasbeen on the rise. Dell Computer has sought to gain market share in Europeby engaging its rivals in a price war, while vendors such as Compaq andHewlett-Packard have been tenaciously hanging on to their share of the PCmarket. At the end of 2000, Compaq held 14.8% of the Europe, Middle Eastand Africa (EMEA) PC market, according to data from Gartner Dataquest.Fujitsu Siemens had a 9.4% share of the market, followed by Dell at 8.0%.

However, by the first quarter of 2001, Dell had already overtaken FujitsuSiemens to gain the second largest portion of EMEA’s PC unit sales. Generalweakness in Fujitsu Siemens’ strongest market, Germany, cost the companyits second place position in Europe, while Dell was able to consolidate itsmarket share by continuing to grow its EMEA sales throughout 2001. It wasthe only one of the top five vendors to increase its sales in the third quarterof 2001. By contrast, IBM, Fujitsu Siemens and Compaq all saw bigdeclines, with sales falling by 30.4% in the case of IBM, and by 23.9% and18.8% for the other two vendors, respectively. Industry observers attributedIBM’s decline to the continued effects of its withdrawal from the retailmarket in Europe, while price competition from Dell and concerns over itsmerger with Hewlett-Packard contributed to Compaq’s decline.

Leading PC Vendor Shipment Estimates in the EMEA*Region, Q3 2001 (in thousands of units and as a % ofmarket share)

Shipments Market share

Compaq 990 11.4%

Dell 749 8.6%

Fujitsu Siemens 638 7.4%

Hewlett-Packard 623 6.8%

IBM 462 5.3%

Others 5,200 60.0%

Total Market 8,662 99.5%

Note: *Europe, Middle East, AfricaSource: Gartner Dataquest, 2001



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IDC’s estimates for the size of the EMEA PC market gave both Compaq andDell considerably larger shares of the market than Gartner Dataquest’s.According to IDC, the top five vendors in the EMEA region held 48.5% ofall PC sales (and 48.8% for the full year, according to preliminary datareleased in January 2002), while Gartner’s analysis gave the leadingvendors a smaller 39.5% share of the market. Preliminary IDC data alsoindicate that Dell and HP posted the largest gains in market share from2000 to 2001 (full-year results).

Leading PC Vendor Shipment Estimates in LatinAmerica, Q3 2001 (in thousands of units and as a % ofmarket share)

Shipments Market share

Compaq 292.6 16.0%

Hewlett-Packard 95.0 5.2%

IBM 93.2 5.1%

Dell 82.5 4.5%

Alaska 66.1 3.6%

Others 1,201.9 65.6%

Source: Gartner Dataquest, 2001


Leading PC Vendor Shipments in the EMEA* Region,Q4 2000 & Q4 2001 (in thousands of units and as a %of market share)

Q42000ship-

ments

Q42000

marketshare

Q42001ship-

ments

Q42001

marketshare

Y/Ygrowth

Compaq 1,803 15.1% 1,625 14.3% -9.9%

Dell 932 7.8% 1,087 9.6% 16.7%

HP 885 7.4% 969 8.5% 9.5%

Fujitsu Siemens 1,020 8.5% 952 8.4% -6.7%

IBM 920 7.7% 671 5.9% -27.1%

Top 5 5,559 46.5% 5,303 46.8% -4.6%

Others 6,383 53.5% 6,029 53.2% -5.5%

Total EMEA 11,942 100% 11,332 100% -5.1%

Note: *EMEA -Europe, Middle East and Africa; preliminary resultsSource: International Data Corporation (IDC), 2002



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With highly educated populations and low PC penetration rates, thecountries of Eastern and Central Europe represent one of the mostpromising markets for personal computers in Europe. As economic growthhas come to this region, personal incomes have begun to rise, andincreasing numbers of businesses and individuals are able to affordpersonal computers. IDC has noted that strength in this market has comefrom small and medium-sized businesses in particular.

Of the four leading Eastern European markets, Russia is by far the largest.Compared to a combined market total of just over 1.2 million units forPoland, the Czech Republic and Hungary, Russians purchased 1.4 millionPC units in 2000.

While growth in the PC market declined in 2001, sales of PCs in EasternEurope increased by 11.7% in the second quarter of the year and 13.8% inthe third quarter. According to IDC’s projections, unit sales in Russia rosefrom 1.4 million in 2000 to 1.6 million in 2001, with revenues increasingby $150 million.

Leading PC Vendor Shipments in the EMEA* Region,2000 & 2001 (in thousands of units and as a % ofmarket share)

2000ship-

ments

Q42000

marketshare

2001ship-

ments

Q42001

marketshare

Y/Ygrowth

Compaq 5,736 15.3% 5,454 15.1% -4.9%

Dell 3,174 8.5% 3,660 10.1% 15.3%

HP 2,787 7.4% 3,140 8.7% 12.7%

Fujitsu Siemens 3,471 9.3% 3,050 8.4% -12.1%

IBM 2,751 7.3% 2,357 6.5% -14.3%

Top 5 17,919 47.8% 17,660 48.8% -1.4%

Others 19,583 52.2% 18,496 51.2% -5.6%

Total EMEA 37,502 100% 36,155 100% -3.6%

Note: *EMEA -Europe, Middle East and Africa; preliminary resultsSource: International Data Corporation (IDC), 2002


PC Unit Sales in Eastern Europe, by Country, 2000 (inmillions)

Russia 1.4

Poland 0.8

Czech Republic 0.3

Hungary 0.2




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PDAs and Other Handheld DevicesSales of personal digitals assistants (PDAs), including dedicated webappliances and PDA-phones, known as “smartphones” continue to beconsiderably lower than in the United States, and according to mostobservers, they are expected to remain so for the foreseeable future.Gartner Dataquest estimates that Western European sales accounted for16.5% of worldwide PDA shipments in 2001, or 2.2 million units. The Asia-Pacific PDA market passed Europe for the first time in 2001, accounting for17.4% of worldwide unit sales.

Research firm Canalys estimates that PDA sales in Western Europe grewat a rate of 11.5% in 2001, while a comparative estimate from IDC ’scomparative estimate places the growth rate for European PDA unit sales at8.0%. Note that both Canalys and IDC include smartphones such as Nokia’sCommunicator in their definition of handheld devices.

PC Unit Sales and Market Revenues in Russia,1997-2001 (in billions of dollars and millions of units)

1997 $1.88 (1.4)

1998 $1.17 (1.0)

1999 $1.20 (1.2)

2000 $1.23 (1.4)

2001 $1.38 (1.6)



Comparative Estimates: Handheld Device Shipmentsin Western Europe, 2000 & 2001 (in millions of units)

2000

2.6

2.5

2.1

2001

2.9

2.7

2.2

Canalys IDC Gartner Dataquest

Source: eMarketer; various, as noted, 2002



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eTForecasts has the most conservative estimate for 2000 Western EuropeanPDA unit sales, at 1.9 million units. The US-based research firm predictsthat sales will increase by a compound annual growth rate (CAGR) of25.4% between 2000 and 2006, which is well ahead of the CAGR for the US(where, at 21.1%, the market is becoming saturated) but slightly behind theworldwide CAGR of 27.0% for the 2000-2006 period. Note that as part ofits analysis, eTForecasts believes that Symbian-based smartphones willplay a significant role in stimulating demand for PDAs in Western Europe,while it also notes that Pocket PC devices have experienced strong salesduring the course of 2001.

Canalys estimates that PDAs will account for about 65% of all mobiledevice sales in Western Europe in 2002, while smartphones will have thesecond largest market share, with 23.6%. By 2003, however, smartphonesare expected to increase their market share to 38% of all handheld sales.Canalys estimates that as of the fourth quarter of 2001, 20% of handhelddevices sold in Europe had integrated wireless capabilities.

PDA Unit Sales in Western Europe, 2000, 2002, 2004 &2006 (in millions)

2000 1.9

2002 3.4

2004 5.2

2006 7.5

Source: eTForecasts, 2001


Mobile Device Shipments in Western Europe,2000-2003 (in millions of units)Device 2000 2001 2002 2003

Feature phone 0.3 0.4 0.5 2.0

Smartphone 0 0.2 1.7 5.6

Handheld/PDA 2.2 3.3 4.7 6.4

Wireless handheld/PDA 0 0.1 0.3 0.6

Total 2.5 3.9 7.2 14.7

Source: Canalys, 2001



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In 2002, leadership of the European market for handheld devices appearsup for grabs, as the release of new products by different manufacturers hascaused quarterly swings in leading vendors’ market share. It remains to beseen how European consumers will react to devices that use the Pocket PC2002 operating system, although the warm reception accorded the previousgeneration of the Pocket PC by European consumers bodes well for thelatest generation. According to IDC, Compaq’s latest PDAs only becameavailable in the European retail channel in late December 2001. Andalthough Nokia’s smartphones managed to carry their third quartermomentum into the final quarter of 2001, Nokia is only starting to run intonew competition from Handspring’s convergent Treo device, as well asPalm’s newly-released i705 – both of which offer robust wireless datafeatures (although unlike the Nokia and Handspring products, Palm’sdevice does not have voice capabilities).

According to data from Canalys, Nokia had the largest share of theEuropean handheld device market in the third quarter of 2001, thanks tothe release of its 9210 Communicator device. However, Nokia dropped tothird place in the market during the fourth quarter, as aggressive price-cutting by Compaq and Hewlett Packard helped boost sales of their PDAs inthe fourth quarter, while Palm regained its position as market leader, thanksto strong holiday sales of its low-end PDA units.

Just as it has come under competitive pressure in the United States,Palm’s substantial lead in the European PDA market diminishedconsiderably over the course of 2001. IDC estimates that Palm’s marketshare fell from 51% of handheld device sales in 2000 to 34% of unit sales in2001. Meanwhile, Compaq and Casio saw their market share increase by179% and 107% respectively in 2001. Nokia also saw significant growth in2001, with its unit sales increasing by 82%.

Note: *includes PDAs and smartphones Source: International Data Corporation (IDC), January 2002


2000 2001

Others28%

Casio3%

Nokia6%

Nokia4%

HP12%

HP8%

Compaq6%

Compaq17%

Palm51%

Others25%

Casio6%

Palm34%

Handheld* Market Share in Western Europe, byVendor, 2000 & 2001


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The success of Nokia’s 9000 series of smartphones has in turn helped theSymbian operating system gain market share in Europe. Canalys estimatesthat 6.7% of handheld devices sold during the third quarter were running the Symbian system, while Palm’s OS held its substantial lead at 54.9% of allunit sales.

On the other hand, the only operating system to see year-over-year growththroughout 2001 was the Pocket PC. Similarly, among vendors, Pocket PC-based devices manufactured by Compaq and HP posted large increases inshipments and significant gains in market share. Palm, on the other hand,recorded a massive 46% fall in shipments year-over-year for the fourthquarter (which IDC attributes to planned inventory reductions).

Other9.3%Symbian

6.7%

Pocket PC29.1%

Palm OS54.9%

Handheld Device Market Share in Western Europe, byPlatform, Q3 2001

Note: Total- 324,538Source: Gartner Dataquest, 2001


Handheld Device Market Share in Western Europe, byPlatform, Q4 2000 & Q4 2001

Q4 2001shipments

(thou-sands)

Marketshare

Q4 2000shipments

(thousands)

Marketshare

Y/YGrowth

Palm OS 382.9 43.3% 549.6 50.6% -30%

Pocket PC 246.6 27.9% 132.4 12.2% 86%

Symbian 124.7 14.1% 207.1 19.1% -40%

Other 130.7 14.8% 197.8 18.2% -34%

Total 884.9 100.0% 1,086.9 100% -19%

Note: includes feature phones, smartphones, handhelds and wirelesshandheldsSource: Canalys, 2002



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Handheld Device Shipments in Western Europe, byVendor, Q4 2000 & Q4 2001 (in thousands of units andas a % of market share)

Q42000ship-

ments

Q42000

marketshare

Q42001ship-

ments

Q42001

marketshare

Y/Ygrowth

Palm 559 49% 301 38% -46%

Compaq 94 8% 140 17% 49%

HP 59 5% 79 10% 34%

Nokia 45 4% 71 9% 58%

Casio 47 4% 44 5% -6%

Others 343 30% 167 21% -51%

Total 1,147 100% 802 100% -30%

Note: *Includes PDAs and smartphonesSource: International Data Corporation (IDC), January 2002



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E. Spending Forecasts by Sector:E-Business/Internet Technology SpendingAlthough not traditionally broken out as a segment of IT spending, there issignificant interest in the portion of technology spending that is dedicatedto e-business or internet-related initiatives. Many companies have begunto dedicate considerable portions of their IT budgets to such projects, andseveral researchers now evaluate the contribution that e-businessinitiatives are making to overall IT spending growth.

However, e-business spending forecasts do vary considerably, due in partto the fact that it is almost impossible for technology vendors to break outtheir product sales by intended customer use. Furthermore, sometechnologies may have multiple uses that make it difficult to define them asinternet-specific. And finally, definitional differences between forecastsresult in different projections, as some researchers include just hardware,software and telecommunications equipment, while others include servicesas well.

After conducting an extensive global survey of e-business spending in27 countries, IDC has estimated that aggregate worldwide spending on e-business projects will exceed $5 trillion between 2001 and 2004. Leadingthe way on the global stage will be the United States, followed by Japanand the United Kingdom. The research firm has gone on to point out thatonline trading initiatives and integration costs will be the primaryexpenditures behind future e-business investment. At the regional level,the leaders will be the UK, France and Germany.

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In its late-2001 survey of 1,009 IT professionals, the Computer SciencesCorporation (CSC) found that European companies had spent the highestproportion of their IT budgets on e-business initiatives in 2001, comparedto companies from other world regions. Although no reason for thisdisparity was given, it is possibly due in part to Europe’s relatively strongereconomic performance, especially during the first half of last year.

Leading European Countries' Aggregate Spending onE-Business Technology, 2001-2004 (in billions)

UK

$361.80

France

$285.80

Germany

$285.80

Italy

$193.89

Spain

$77.41

Sweden

$67.85

Netherlands

$66.35

Denmark

$44.80

Norway

$41.28

Belgium

$40.36




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Another reason for this difference between European and North Americanfirms’ e-business spending is likely due to American firms’ over-spendingon technology prior to 2001. Several observers have suggested that whileAmerican businesses used 2001 to digest many of their earlier IT purchases,European firms were using the year to catch-up.

In a web-based survey of more than 900 businesses with internetoperations, IDC found that internet projects already began to account for asignificant portion of companies’ IT budgets in the year 2000. Largebusinesses expected to spend the most on internet initiatives in 2001, with21.2% of firms allocating more than one quarter of their IT budgets to suchprojects. Not surprisingly, smaller companies that typically operate less-complex e-business systems devoted a lower portion of their budgets tothese activities.

In total, IDC found that the mean percentage of IT budgets directedtoward internet projects was 10.1% for all companies in 2000, and forecastto rise to 10.6% by the end of 2001. Broken down by country, the IDCsurvey revealed the surprising result that French companies are spendingthe greatest portion of their IT budgets on e-business projects. They arefollowed by Japanese and Canadian companies, which are allocating about18% of IT resources to web initiatives.

E-Business Spending as a % of IT Budgets by Region,2001

Europe 33.0%

Asia-Pacific 12.2%

Australia-New Zealand 11.7%

North America 7.9%

Source: Computer Sciences Corporation, 2001


IT Spending on Web Initiatives in Selected Countries,2001 (as a % of IT budget)

US 15%

Japan 18%

Germany 10%

France 20%

Canada 18%

Australia 15%

UK 16%




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To learn more about IT, telecommunications and PC spending patternsin Europe and around the world, read eMarketer’s IT SpendingReport,TM Telecommunications Spending ReportTM and the PC MarketReport,TM part of the IT & Telecommunications Spending subscriptionpackage. To order copies or subscribe to the three-part series, visit theeMarketer website (http://www.emarketer.com) or send an e-mail [email protected].


IVMethodology 7

I Introduction 11




A. Telecommunications 54

B. Broadband 75

C. Internet Access Devices 85

D. Internet Infrastructure 95





Index of Charts 197


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A.Telecommunications

Fixed-Line TelephonesFixed telephone lines are widely available throughout Western Europe.With a median rate of 49.3 telephones per 100 inhabitants (amongcountries listed in the chart below) and an average household size abovetwo, virtually all Europeans have the capacity to dial up to internet serviceproviders (ISPs) if they have a computer with a modem. Note that the minordeclines in telephone penetration exhibited by some countries in the chartbelow may be attributed to population growth rates that were slightly inexcess of the increase in main telephone lines.

Main Telephone Lines per 100 Inhabitants in SelectedEuropean Countries, 2000 & 2001

Sweden

74.6

73.9

Denmark

72.0

72.3

Norway

73.6

72.0

Switzerland

72.7

71.8

Germany

61.1

63.5

Netherlands

61.8

62.1

UK

58.9

57.8

France

57.7

57.4

Finland

55.0

54.8



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Greece

53.6

52.9

Belgium

49.8

49.3

Regional median

49.8

49.3

Italy

47.4

47.1

Austria

47.2

46.8

Spain

42.6

43.1

Portugal

43.0

42.4

Czech Republic

37.6

37.4

Hungary

38.0

37.4

Estonia

36.3

35.2

Poland

28.3

29.5

Slovak Republic

31.4

28.8

Russia

21.8

24.3

2000 2001

Source: International Telecommunication Union (ITU), March 2002



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However, there is a noted disparity between the general diffusion of fixed-line phones in Western and Eastern Europe, which brings down the region’soverall telephone penetration rate. In Russia and Poland, for example,availability of main telephone lines is far more limited, with spottier servicethan the leading economies of Western Europe, particularly theScandinavian countries. Rather, telephone penetration (both fixed-line andmobile) in Eastern European countries is similar to that of emergingeconomies elsewhere in the world. Despite this encumbrance, Europe as awhole still has the world’s highest telephone penetration rates, just aheadof Oceania.

Gartner has recently warned of an impending consolidation in the fixed-line telephony segment. The process has begun with the acquisition ofNorway’s largest incumbent telephone operator, Sonera, by Sweden’s Telia,in a deal valued at more than $6.5 billion in stock. The move marks the firstcross-border joining of incumbent telephone operators in Europe.

Main Telephones Lines per 100 InhabitantsWorldwide, by Region, 2000 & 2001

Europe

39.8

40.5

Oceania

40.3

40.0

Americas

35.2

35.1

Worldwide

16.4

17.2

Asia

9.7

10.8

Africa

2.5

2.6

2000 2001




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By 2006, Gartner predicts, only half of Europe’s current fixed-lineoperators will exist as independent entities. Some, Gartner contends, willleave the market simply because they will not be able to derive significantenough revenue streams to survive. McKinsey, employing the sametimeline, believes that only two to three large integrated telephonecompanies will remain, each with significant stakes in data, wireless andfixed-line services (although it cautions that political considerations,arising from the fact that many European governments still hold sizablestakes in the incumbent carriers, may affect the restructuring of themarket). The US-based consultancy maintains that incumbency alone is nolonger sufficient to retain market leadership. Rather, according to Gartner,long-term success in Europe’s increasingly competitive fixed-line marketdepends on the following four factors:

■ Cost containment■ Significant revenue streams that can be used to drive new

business ventures■ Ready access to capital■ Focus on maintaining high-quality services

Wireless TelephonyIn the past two years, rampant overspending to obtain third-generation(3G, also know as UMTS or Universal Mobile Telecommunications System)licenses has altered the landscape of Europe’s wireless market, adding tothe likelihood of increased consolidation among carriers. According to theEMC World Cellular Database, more than 70% of the region’s subscribersare attributable to the six leading wireless operators: Vodaphone, BritishTelecom, France Télécom/Orange, Telecom Italia Mobile (TIM), DeutscheTelekom and Telefónica. However, many of these operators, as well asothers such as Sonera and the Netherlands’ KPN, are saddled with debt.McKinsey has calculated that the total debt held by Europe’s eight largesttelecommunications operators (much of it attributable to investment innext-generation wireless licenses) doubled between 1999 and 2001, risingto $213.7 billion. Carriers have been forced to resort to massive debt write-downs in an effort to recoup some momentum in the marketplace.

Acknowledging that second-generation (2G) mobile networks andservices will remain in place for some years to come, Ovum recommendsthat operators support network sharing (especially given that infrastructurebuild-out costs will account for 90% of the operators’ capital expenditures)and establish roaming partnerships in an effort to reduce the financialburdens of moving Europe towards the launch of 3G services. The UK-based research firm believes that the 3G platform will not realistically beavailable for widespread commercial use until 2003.


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Ongoing technical and financial uncertainties associated with the launch ofnext-generation services have led McKinsey to predict that companies likeVodaphone and Orange, which already have a pan-European presence, willbe among the survivors in the war for wireless market share. According tothe consultancy, size and geographic coverage offer the following benefits:

■ Greater access to new technology■ Ability to develop and market a global brand■ Faster product/service launches, including more competitive offerings

for corporate customers■ Preferential roaming agreements

The financial travails of Europe’s telcos aside, the region has long been aworldwide leader in the use of mobile telephones, with a median wirelessdensity rate (mobile subscribers per 100 inhabitants) of 73.7 (among the 21countries listed in the chart below sourced from the InternationalTelecommunication Union) and a regional average of 43.8 (again, broughtdown by lower penetration rates in Russia and Eastern Europe). Wirelessteledensity is an important indicator, not only of overall cellular usage, butalso of a nation’s overall economic condition and technologicaldevelopment. Countries with higher mobile phone penetration rates arealso more likely to have more mature cellular markets, with operators thatoffer sophisticated wireless services, including mobile web browsing,messaging and data transmission.

As of March 2002, most leading European countries boasted populationswith more mobile than fixed-line telephone subscribers. The advance ofwireless from 2000 to 2001 is particularly evident in several EasternEuropean nations, including the Czech Republic, Hungary, Poland and theSlovak Republic.


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Mobile Telephone Subscribers in Selected EuropeanCountries, 2000 & 2001 (as a % of total telephonesubscribers)

Portugal

60.7%

64.6%

Italy

60.9%

64.1%

Czech Republic

52.9%

63.8%

Austria

62.0%

63.3%

Spain

59.1%

60.3%

Belgium

51.3%

60.2%

Finland

56.7%

58.7%

Greece

51.2%

58.7%

Slovak Republic

39.5%

58.0%

UK

55.3%

57.5%

Regional median

51.3%

57.1%

Hungary

44.7%

57.1%

Estonia

51.6%

56.4%

Italy has assumed the regional lead in mobile phone penetration(previously held by Austria and, before 2000, by Finland) with 83.9subscriptions per 100 inhabitants. By contrast, Poland’s mobile accountshave grown 126% since 1995, but the country still has a penetration rateless than one-third as large as Italy’s, indicating that the strong expansionwas from a relatively tiny subscriber base.

Netherlands

52.1%

54.3%

Norway

58.5%

53.4%

Germany

49.0%

51.8%

France

46.1%

51.4%

Sweden

49.0%

51.0%

Denmark

46.7%

50.5%

Switzerland

47.0%

50.2%

Poland

38.1%

46.9%

Russia

9.2%

13.5%

2000 2001




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According to a report by Schroeder Salomon Smith Barney and BankHandlowy, the country’s low wireless penetration, along with a stalledeconomy and relatively high unemployment, have contributed to loftyservice fees. In turn, economic woes have undoubtedly kept many Poles offsubscriber rolls.

Mobile Telephone Subscribers per 100 Inhabitants inSelected European Countries, 2000 & 2001

Italy

73.7

83.9

Norway75.1

82.5

Austria

77.0

80.7

UK

72.7

78.3

Finland

72.0

77.8

Portugal

66.5

77.4

Sweden

71.7

77.1

Greece

56.2

75.1

Belgium

52.5

74.7

Netherlands

67.3

73.9

Regional median

61.7

73.7



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Denmark

63.1

73.7

Switzerland

64.4

72.4

Germany

58.6

68.3

Czech Republic

42.2

65.9

Spain

61.7

65.5

France

49.3

60.5

Hungary

30.8

49.8

Estonia

38.7

45.5

Slovak Republic

20.6

39.7

Poland

17.5

26.0

Russia

2.2

3.8

2000 2001




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Europe as a region currently has the highest total of wireless subscribers inthe world. As noted above, penetration rates are phenomenally high,particularly in the more developed economies of Western Europe.

Mobile Telephone Subscribers per 100 InhabitantsWorldwide, by Region, 2000 & 2001

Oceania

35.8

45.0

Europe

36.6

43.8

Americas

22.0

26.1

World

12.3

15.5

Asia

6.7

9.3

Africa

2.0

2.9

2000 2001




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Wireless Subscribers in Europe, 2001-2005 (in millions)

2001

336.4

45.7

2002

423.3

61.8

2003

488.8

77.0

2004

532.5

90.4

2005

561.1

101.9

Western Europe Eastern Europe

Source: EMC World Cellular Database, October 2001


Comparative Estimates: Wireless Subscribers inWestern Europe, 2001-2006 (in millions)

2001

336.4

294.4

2002

423.3

320.5

2003

488.8

334.9

2004

532.5

342.0

2005

561.1

345.7

2006

347.7

EMC World Cellular Database Yankee Group

Source: Yankee Group, 2002; EMC World Cellular Database, October 2001



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Wireless Subscribers in Selected European Countries,2000 & 2001 (in millions)

Austria

6.3

6.6

Belgium

5.3

7.7

Czech Republic

4.3

6.8

Denmark

3.4

4.0

Estonia

0.6

0.7

Finland

3.7

4.0

France

29.1

35.9

Germany

48.2

56.2

Greece

5.9

8.0

Hungary

3.1

5.0

Italy

42.2

48.7

Netherlands

10.7

11.9

Norway

3.4

3.7



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As a result of increasing market saturation, the steep growth rates of thepast few years are likely to flatten out, with most of the increases insubscriber rolls coming from the emerging economies of Eastern Europe.For example, Russia’s Ministry of Telecommunications predicts that thenumber of the country’s wireless subscribers will take a substantial jump in2002. Allied Business Intelligence, meanwhile, predicts steady growth inthe number of subscribers in Eastern Europe through 2007, even accordingto its moderate forecast.

Poland

6.7

10.1

Portugal

6.7

8.0

Russia

3.3

5.6

Slovak Republic

1.1

2.1

Spain

24.7

26.5

Sweden

6.4

6.9

Switzerland

4.6

5.2

UK

43.5

47.0

2000 2001



Mobile Phone Subscribers in Russia, 2001 & 2002 (inmillions)

2001 7.8

2002 13.0

Source: Russian Ministry of Telecommunications, April 2002;Europemedia.net, April 2002



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Wireless Subscribers in Eastern Europe, 1998-2007 (inmillions and as a % of subscribers worldwide)

1998

8 (3%)

8 (3%)

1999

14 (3%)

14 (3%)

2000

24 (4%)

24 (4%)

2001

38 (4%)

35 (4%)

2002

45 (4%)

40 (4%)

2003

58 (5%)

50 (5%)

2004

68 (5%)

61 (5%)

2005

98 (6%)

71 (6%)

2006

111 (6%)

81 (6%)

2007

116 (6%)

86 (6%)

Aggressive forecast Moderate forecast

Note: Aggressive forecast CAGR=25%; Moderate forecast CAGR=20%Source: Allied Business Intelligence (ABI), 2001



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Much of the recent growth in wireless subscribers has come from users whohave adopted pre-paid calling plans. When operators were focused primarilyon growing their subscriber bases, they rolled out pre-paid services, whichreduced the financial risks to vendors and opened the door to a widerportion of the population, albeit at a higher per-call rate than traditionalplans. Attractive segments included teens and college-age kids who couldnot otherwise establish credit, and their parents who sought to give themphone service at a fixed monthly cost. In 1997, only 15% of mobile phoneusers in Europe were on pre-paid plans, but by the end of 2000, the figurehad grown to more than 50%.

For European wireless operators, the strategy of attracting subscribers byoffering them lower-fee services has not come without costs. The result hasbeen an increased number of unprofitable mobile users, producing adramatic downward effect on average revenue per user (ARPU) per monthand reducing the chances that users will adopt costly next-generationservices such wireless data transmission, content delivery and mobilecommerce. As operators face the hard financial realities of the 3Gjuggernaut, they must also focus on migrating pre-paid users to post-paidplans as part of an effort to halt the continuing decline in ARPU. The YankeeGroup believes that pre-paid usage in Western Europe will peak by the endof 2002, at a rate of 65.3%, and ultimately decline again to 55.5% by 2006.


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Wireless Subscribers in Western Europe, bySubscription Type, 2001-2006 (in millions and as a % oftotal wireless subscribers in Western Europe)

2001

192.1 (65.3%)

102.3 (34.7%)

294.4

2002

209.3 (65.3%)

111.2 (34.7%)

320.5

2003

214.0 (63.9%)

120.9 (36.1%)

334.9

2004

209.3 (61.2%)

132.7 (38.8%)

342.0

2005

201.4 (58.3%)

144.3 (41.7%)

345.7

2006

192.8 (55.5%)

154.9 (44.5%)

347.7

Prepaid Postpaid Total

Source: Yankee Group, February 2002



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A February 2002 report by French research firm IDATE notes that prepaidservice has achieved much higher penetration rates in Southern Europeancountries such as Portugal (which, in 1995, was the first country to offer it),Spain and Italy. Today, prepaid in these countries accounts for 70-80% ofthe wireless market. In Italy, as the chart below demonstrates, nearly 90%of wireless users have adopted prepaid service. By contrast, inScandinavian countries, which have extremely high overall wirelesspenetration rates, prepaid remains a small market, while other countrieswith large wireless user bases, such as Germany, France and the UK, havemanaged to balance pre- and postpaid users.

Wireless Subscribers in Selected European Countries,by Subscription Type, March, June & September 2001FranceMarch 2001

47.7%

52.3%

June 200149.8%

50.2%

September 200148.4%

51.6%

GermanyMarch 2001

55.6%

44.4%

June 200155.8%

44.2%

September 200155.7%

44.3%

ItalyMarch 2001

84.2%

15.8%

June 200186.2%

13.8%

September 200188.7%

11.3%



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The proliferation of prepaid wireless calling and carriers’ emphasis onincreasing the overall number of wireless users (regardless of theirsubscription type) are the factors contributing to the ongoing fall in ARPU.Additional reasons, also noted in the IDATE report, include the following:

■ Increasingly competitive call pricing■ Large numbers of low usage customers (i.e., those who call

infrequently)■ Inactive users on subscriber rolls

Given the relative flattening of subscriber growth rates in Western Europe,it is not surprising that the prospects for handset sales remain bleak in theshort term. In addition, the region is in a period of transition as far aswireless technology is concerned, with General Packet Radio System(GPRS), the first stage of 2.5G enhancements to the Global System forMobile Communications (GSM) platform. As the upgrades become morewidely available across Europe toward the end of the year, the YankeeGroup predicts that handset sales will start to pick up. The research firmoptimistically projects that 42% of Western Europe’s installed wireless basewill be on a 3G platform by 2006.

UKMarch 2001

59.4%

40.6%

June 200159.7%

40.3%

September 200159.1%

40.9%

Prepaid Postpaid

Source: IDATE, February 2002


Western European Handset Sales, by Technology,2001-2006 (in millions)

2001 2002 2003 2004 2005 2006

GSM 145.6 114.1 71.8 41.1 19.0 –

HSCSD – 0.2 0.2 0.1 0.1 –

GPRS 1.4 36.1 82.6 98.7 100.8 82.0

W-CDMA – 0.1 9.1 39.3 71.0 114.4

Total 147.0 150.5 163.7 179.2 190.9 196.4

Source: Yankee Group, November 2001



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The transition to upgraded networks, including the new emphasis ofoperators on data transmission and services, has also clouded the revenuepicture in the near term. The California-based research firmTelecompetition, Inc., in conjunction with the UMTS Forum, a wirelessindustry group, remains upbeat in its assessment of the market, projectingthat the cost of 3G licenses will pale in relation to the revenues operatorswill reap between now and the end of the decade.

The mix of those revenues will shift over time. Simple and enhancedvoice combined will become the leading 3G service in terms of bothsubscriptions and revenues, followed by customized infotaintment.

Subscriptions to Selected 3G Wireless Services inEurope, 2001-2010 (in millions)

2001 2002 2003 2004 2005

Business MMS* – 0.0 1.0 2.5 5.1

Consumer MMS* – 0.3 2.8 8.6 12.8

Customized infotainment – 0.6 7.4 20.5 27.2

Mobile internet access – 0.0 0.7 1.3 2.4

Mobile intranet/extranet access – 0.3 2.6 4.6 8.8

Simple voice – 0.8 7.9 21.8 33.9

2006 2007 2008 2009 2010

Business MMS* 10.8 17.1 29.8 49.6 72.6

Consumer MMS* 20.4 27.2 33.4 40.9 46.3

Customized infotainment 39.1 53.6 66.2 81.9 106.2

Mobile internet access 4.4 6.3 9.7 15.2 17.1

Mobile intranet/extranet access 16.7 23.8 37.4 55.8 73.1

Simple voice 56.7 84.2 113.5 152.9 196.4

Note: *multimedia messaging services Source: UMTS Forum; Telecompetition, Inc., August 2001



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The arrival of more advanced wireless platforms will also clear the way forenhanced messaging services, allowing operators to graduate from short-text messaging services (SMS), which have become wildly popular acrossEurope, to multimedia messaging services (MMS) that incorporate voice,text, image and video applications. The Yankee Group is particularlybullish about MMS, predicting it will grow into a $44 billion market by2006, representing 24% of Europe’s entire wireless service market. Theresearch firm anticipates that consumer and business users will send 250billion messages per year by the middle of the decade.

Revenue from 3G Wireless Services in Europe,2001-2010 (in billions)

2001 2002 2003 2004 2005

Business MMS* – $0.00 $0.09 $0.38 $0.79

Consumer MMS* – $0.40 $0.64 $1.79 $2.39

Customized infotainment – $0.09 $2.07 $5.79 $7.90

Location-based services – – $0.14 $0.90 $1.38

Mobile internet access – $0.01 $0.29 $0.54 $0.78

Mobile intranet/extranet access – $0.05 $1.14 $1.93 $2.89

Rich voice – – $0.00 $0.04 $0.32

Simple voice – $0.13 $2.29 $5.72 $8.00

2006 2007 2008 2009 2010

Business MMS* $1.84 $3.21 $5.20 $7.57 $8.34

Consumer MMS* $3.37 $4.06 $5.02 $5.95 $6.42

Customized infotainment $11.36 $15.34 $18.70 $22.83 $29.26

Location-based services $1.44 $1.74 $2.28 $2.70 $3.25

Mobile internet access $1.15 $1.61 $2.41 $3.67 $4.01

Mobile intranet/extranet access $4.40 $6.09 $9.29 $13.49 $17.18

Rich voice $0.53 $1.48 $2.83 $4.71 $7.13

Simple voice $12.06 $16.11 $19.55 $23.69 $27.39

Note: *multimedia messaging servicesSource: UMTS Forum; Telecompetition, Inc., August 2001



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Frost & Sullivan offers a somewhat more conservative forecast of 91 billionmessages per year and $26.9 billion in revenues. Analysys’ prediction for2007 aligns more closely with the Yankee Group’s 2006 figure. Note,however, that it bundles infotainment revenues with those from messagingand confines its scope to Western Europe (whereas the Yankee Groupnumber applies to all of Europe).

Looking for more region- and country-specific data on cellularsubscribers and revenues? eMarketer’s new eStat Database containshundreds of records on the European wireless market. Try it now athttp://www.emarketer.com.

European Market for Multimedia Messaging Service(MMS), 2002-2006

2002 2003 2004 2005 2006

Number of MMS per subscriberper month

5 10 17 23 28

Number of MMS per month (inmillions)

36 318 1427 3807 7580

Number of MMS per year (inmillions)

216 3817 17128 45683 90957

Source: Frost & Sullivan, March 2002


Multimedia Messaging Service (MMS) Market inEurope, 2002 & 2006 (in billions)

2002 $0.07

2006 $26.9

Source: Frost & Sullivan, March 2002


Mobile Messaging and Infotainment Revenues inWestern Europe, 2001 & 2007 (in billions of €)

2001 €7.6

2007 €44.0

Source: Analysys Research, March 2002




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B. BroadbandBroadband internet access has been available in Europe since 1997, whencable modem access first became available (digital subscriber linesfollowed in 1999). As in the US and Canada, the majority of Europe’sbroadband solutions will revolve around these two access technologies.ISDN has achieved relatively high penetration across much of Europe, butits future as a broadband access alternative remains uncertain given itslimitations. The market will also make limited room for the followingalternatives in 2002 and beyond:

■ Fixed-wireless■ Two-way satellite ■ Fiber-to-the-home (FTH)■ Powerline technology

Prior to the availability of DSL and cable modem connections, businessesrequiring high bandwidth capabilities had little in the way of optionsbesides circuits leased from incumbent telecommunications operators.

Bandwidth DemandSchroder Salomon Smith Barney’s January 2001 study of bandwidthsupply and demand in Europe clearly indicates that the demand forbandwidth will soar over the next nine years. Corporate intranet users willhave the greatest need for bandwidth, with residential internet users adistant second. Note that the second table below takes into account thebandwidth demanded in peak periods.

European Bandwidth Demand, 1999-2002, 2005 & 2010(Gigabit rings)

1999 6,798

2000 14,982

2001 32,815

2002 64,867

2005 455,473

2010 4,924,029

Source: Schroder Salomon Smith Barney, January 2001



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In the business sector, broadband demand will be particularly strong ascompanies step up their e-commerce offerings. Ovum forecasts theinstalled base of leased circuits will rise to over 20 million lines by the endof 2004.

Peak Adjusted European Bandwidth Demand inGigabit Rings, by Sector, 1999-2002, 2005 & 2010

Voice

Residentialinternet

Consumer mobile internet

Business internet

Corporateintranets

1999

1,105

460

0

105

1,284.2

2000

1,453

997

0

222

3,840.5

2001

1,880

2,137

0

405

9,601.0

2002

2,245

4,327

0.2

747

19,934.8

2005

3,724

61,272

309

15,830

116,896.0

2010

4,144

1,024,676

48,035

118,114

1,023,060

Source: Schroder Salomon Smith Barney, January 2001


Enterprise Broadband Demand of Leased Circuits, byRegion, 2000-2004 (in thousands of lines)

2000 2001 2002 2003 2004

North America 870 1,028 1,180 1,397 1,661

Europe 6,791 8,401 9,797 10,352 10,444

Asia Pacific 5,863 6,912 7,706 7,900 7,937

Worldwide 14,060 16,943 19,244 20,180 20,564

Source: Ovum, 2000



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Voice traffic is expected to account for less than 1% of bandwidth demandin 2010, according to Schroder Salomon Smith Barney. Consumer mobileinternet will only begin to have an effect on the demand curve in the latterhalf of this decade.

2001 2005

Corporate intranets

68.4%

Corporate intranets

59.1%

Residential internet 15.2%

Residential internet 30.9%

Business internet 2.8%

Business internet 7.9%

Consumer mobile 0.1%


Voice 13.4%

Voice 1.8%

Residential internet

46.2%Corporate intranets

46.1%

Business internet

5.3%


Voice 0.2%

Source: eMarketer, based on Schroder Salomon Smith Barney figures, 2001

Bandwidth Demand in Europe, by Sector, 2001, 2005 & 2010 (as a % of total bandwidth demand)

www.eMarketer.com033734 ©2001 eMarketer, Inc.

2010


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Market PerspectivesMost European countries have been slow to add broadband capacity. Onefactor that has hindered subscriber growth is a lack of competition in theregion’s broadband market, particularly between cable andtelecommunications firms. According to Analysys, in those countries wherethe incumbent telecommunications company also owns the cableinfrastructure (such as France, Germany, Spain and Sweden), there hasbeen less emphasis on investing in network upgrades necessary to offercable modem access (which could cannibalize the telcos’ other offerings)and broadband penetration rates tend to be low relative to othertechnologies. Conversely, in more competitive operating environmentswhere the telcos do not own the cable TV infrastructure (e.g., Austria,Belgium, the Netherlands and Switzerland), cable operators have upgradedtheir networks in order to compete with the telcos’ DSL offerings.

The question that telecommunications firms, particularly incumbents,face as the broadband market develops, is whether to combat cableoperators by offering value-added services that go beyond high-speedinternet access, such as video-on-demand (VOD), gaming and musicsubscriptions. DSL also has considerable potential for personalized features(for example, interactive services and shopping).

Other factors holding back the diffusion of Europe’s broadband marketinclude the limited steps most countries have taken toward unbundling ofthe local loop, the pace of which must continue in order to increase accessto high-bandwidth services, and the high cost of always-on services.Broadband providers must focus on offering consumers more attractivepricing plans if they intend to raise subscription rates. Marketers shouldbenefit from the greater availability of broadband services, as high-speedaccess and unlimited, always-on internet connectivity tend to be correlatedwith a propensity to shop and buy online.

Research firms and consultancies offer mixed assessments about the growthpath of the European broadband market. eMarketer expects the number ofbroadband households to double year-over-year through 2003, increasing tonearly 38 million by 2004, making Europe the world’s second largest region interms of total households with high-bandwidth connectivity.

Broadband Households Worldwide, by Region,2000–2004 (in thousands)

2000 2001 2002 2003 2004

North America 7,594 13,700 21,210 30,920 42,200

Europe 1,578 5,865 11,805 22,641 37,900

Asia-Pacific 5,537 11,145 16,372 23,015 32,925

Latin America 104 310 708 1,355 2,350

Other 0 200 500 1,000 3,000

World 14,813 31,220 50,595 78,931 118,375

Source: eMarketer, November 2001



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Forrester Research’s forecast is also optimistic, but does not expect thenumber of European broadband households to reach 38 million until 2006.Forrester’s results come from a survey of 22,825 adult respondents fromseven European countries, who were interviewed for the Q2 2001 ConsumerTechnographic study. By 2006, Forrester predicts that broadbandpenetration in Western Europe will reach 24%.

The Yankee Group and Jupiter Media Metrix also continue to predict thatthe pace of growth will accelerate over the next few years. Jupiter, forexample, predicts that the UK and Italy will experience a nearly 300%increase in the number of broadband households over the course of 2002,good for the fastest growth rates in Europe. Nevertheless, Jupiter maintainsthat Belgium and Sweden will continue to lead the region in householdpenetration, with 12% and 18% of homes with broadband internetconnections. The research firm also believes that the European broadbandmarket has ample room for expansion for the next five years, projectingthat the region will not reach 15% of all households until 2006.

Another group of market analysts, led by GartnerG2 and McKinsey,maintains that the region’s broadband revolution has lost its momentum, avictim of incumbent telcos overburdened with debt. GartnerG2’s February2002 report, based on a consumer survey carried out in France, Germanyand the UK, offers a pessimistic view of the broadband marketplace. It findsthat broadband access providers have not yet offered consumers aconvincing value proposition, and predicts that unless access charges dropsignificantly, only 10% of households in these three leading internetmarkets will have broadband access by 2005. The report notes thattelecommunications firms in particular are in a bind, as offering lower-cost

Western European Households with BroadbandAccess, 2000-2006 (in millions)

2000

2

2001

6

2002

9

2003

14

2004

21

2005

29

2006

38

9

27

45

Source: Forrester Research, January 2002



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DSL services could have a dramatically negative effect on existing dial-uprevenues (which remain considerable given that most European countriescontinue to have metered access). GartnerG2’s message to marketers is toexpect the narrowband internet to remain in place for some time, and todevelop broadband content for only specific markets where penetrationrates are higher.

McKinsey has classified countries into three “tiers” of broadbanddeployment−early, midterm and late−taking into account changes inpricing schemes and coverage strategies. The following table reproducesMcKinsey’s analysis for selected European markets.

Broadband Internet Households in Selected EuropeanCountries, December 2001 (in millions and broadbandas a percent of total households)

France Germany UK

Total households in country 24.8 37.7 25.7

Internet households 4.5 10.3 8.8

Broadband households 0.5 (2%) 1.0 (3%) 0.2 (1%)

Source: GartnerG2, December 2001


Broadband Markets in Selected European Countries,2000-2010

Early tier NetherlandsSweden

Midtermtier

GermanyUK

Late tier FranceItaly

Dominantaccesstechnology

• High adoption rates due tocompetition among accessproviders• Changes in access pricesand coverage strategies willhave little effect on adoptionrates

• Moderate levels ofcompetition, adoption andcoverage• Lower access prices couldhave significant impact onuptake

• Little competition, modestcoverage, high prices

Marketcharacteristics

DSL(exceptNetherlands)

DSL

DSL

Source: McKinsey Quarterly, 2001



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Cable vs. DSLAmong available broadband internet access solutions in Europe, DSL isgrowing the fastest. Probe Research reported that there were fewer than500,000 DSL subscribers in Germany at the end of 2000, but by the end of 2001, the total had increased to 1.4 million. In France, the number ofsubscribers grew from fewer than 100,000 to over 500,000 in the same time frame. According to Forrester Research, ADSL accounted for 56% ofall broadband connections in Western Europe at the end of 2001, and, asnoted in the table above, McKinsey expects DSL to prevail across most ofWestern Europe.

By 2006, the Yankee Group predicts that residential ADSL subscriberswill outnumber cable modem subscribers by more than three to one. Evenin IDATE’s low-growth scenario for broadband household diffusion (whichcovers the 15 countries of the EU plus Norway and Switzerland), year-over-year growth rates for DSL far outstrip those for cable or fixed-wirelessaccess (wireless local loop or WLL).

Residential Broadband Subscribers in WesternEurope, by Access Technology, 2001-2006 (in millions)

2001

1.9

2.8

2002

6.7

3.3

2003

11.7

4.5

2004

16.7

5.5

2005

21.1

6.4

2006

24.3

7.2

ADSL Cable

Source: Yankee Group, January 2002



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Research by the European Commission has revealed almost uniformly highprices for ADSL access across the region. Operators must lower the price oftheir broadband offerings if they want consumers to widely adopt theaccess technologies.

Business DSL subscriptions will remain a relatively small portion of themarket through the middle of the decade, according to separate analyses byPoint-Topic.com and the Yankee Group. However, ARPU for business userswill be considerably higher, particularly as smaller firms, shut out of theleased-line market by high prices, turn to symmetrical DSL (SDSL) andADSL as broadband alternatives.

Penetration Rates for Household Broadband InternetAccess in Europe (High- and Low-Growth Scenarios),by Access Technology, 2001-2006High-growth scenario

2001 2002 2003 2004 2005 2006

DSL 3% 9% 12% 17% 21% 26%

Cable 1% 2% 3% 4% 5% 7%

WLL 0% 0% 0% .4% 1% 2%

Low-growth scenario

DSL 3% 8% 10% 13% 15% 18%

Cable 1% 2% 3% 3% 4% 5%

WLL 0% 0% 0% .2% .6% 1%

Note: Results apply to 15 EU countries plus Norway and SwitzerlandSource: IDATE, October 2001


Monthly Access Costs for ADSL and Cable ModemInternet Access in Selected European Countries,December 2001

ADSL Cable modem

Austria €58.53 €45.82

Belgium €29.14 €28.21

Denmark €29.70 €16.79

Finland €43.63 €13.86

France €38.65 €38.84

Germany €24.09 €33.63

Italy €63.70 –

Netherlands €37.61 €61.55

Portugal €106.40 €55.95

Spain €90.73 €11.31

Sweden €40.45 €17.04

UK €67.18 €40.30

Note: Lowest monthly cost at 1 Megabit/sec. Euros at purchasing priceparity excluding value added taxSource: European Commission, December 2001



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DSL Subscribers Worldwide, by Region, End of 2001 (inthousands)

Total DSLsubscribers

Residential DSLsubscribers

Business DSLsubscribers

Asia-Pacific 7,949 6,970 979

North America 5,510 4,267 1,242

Western Europe 4,245 3,535 710

South andSoutheast Asia

634 455 179

Latin America 407 291 116

Eastern Europe 33 20 13

Middle Eastand Africa

48 37 11

Worldwidetotal

18,826 15,575 3,250

Source: Point-Topic.com, April 2002


Business Internet Subscribers in Western Europe, byAccess Technology, 2001 & 2006 (in millions)

Dial-up

8.5

12.8

ISDN

4.9

2.4

xDSL

0.9

5.3

2001 2006




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To learn more about the state of broadband internet access around theworld, read eMarketer’s The Benefits of Broadband Report.TM To ordercopies, visit the eMarketer website (http://www.emarketer.com) orsend an e-mail to [email protected].

European Business DSL Revenues, 2000-2006 (inmillions €)

2000

€3

€11

2001

€80

€284

2002

€329

€1,017

2003

€876

€1,762

2004

€1,783

€2,463

2005

€3,342

€2,972

2006

€5,500

€3,212

SDSL* ADSL**

Note: *Symmetrical DSL; **Asymmetric DSLSource: Yankee Group, January 2002




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C. Internet Access Devices

Personal Computers (PCs)Internet usage is closely tied to PC ownership and penetration rates. Theslowing economy drove down growth in European PC sales in 2001,particularly in the second half of the year. Moreover, Europe remains aconsiderably smaller market than the US, with far fewer PCs per 100inhabitants (a median of 28.0 among the countries listed in the chartbelow) than the US (which has 62.3 PCs per 100), both at home and in theworkplace. As with fixed-line and mobile telephones, PC penetration inEurope is marked by considerable region-wide disparities. Note that in thechart below, the low average for the Americas reflects the weight of largeLatin American countries like Brazil and Mexico, which have significantlylower PC penetration rates than the US or Canada.

PCs per 100 Inhabitants in Selected EuropeanCountries, 2000 & 2001

Sweden

50.7

56.1

Norway

49.1

50.8

Switzerland

50.0

50.0

Denmark

43.2

43.2

Netherlands

39.4

42.9

Finland

39.6

42.4

UK

33.8

36.6

Belgium

34.5

34.5

France

30.4

33.7


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Germany

33.6

33.6

Austria

28.0

28.0

Regional median

28.0

28.0

Italy

18.0

19.5

Estonia

15.3

17.5

Spain

14.5

16.8

Slovak Republic

13.7

14.8

Czech Republic

12.1

12.1

Portugal

10.5

11.7

Hungary

8.7

10.0

Poland

6.9

8.5

Greece

7.1

8.1

Russia

4.3

5.0

2000 2001




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Like the United States, the PC market in Western Europe is reachingsaturation, which means that growth rates will decline as the marketreaches maturity. However, the Computer Industry Almanac predicts thatthe number of computers in use in Western Europe will exceed the figurefor the US by 2007, even though the US will maintain a slight lead inhousehold PC penetration.

PCs per 100 Inhabitants Worldwide, by Region, 2000 &2001

Oceania

36.5

39.9

Americas

24.5

26.6

Europe

16.7

17.9

World

7.7

8.4

Asia

3.0

3.3

Africa

1.0

1.1

2000 2001




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Gartner Dataquest has noted that as markets become more mature, PCvendors will need to consider ways to encourage households to purchasemultiple computers. One idea Gartner has suggested is for vendors topromote the ease with which computers may be networked within the home.In turn, the expectation is that this will provide vendors with the opportunityto sell either stripped-down PCs or web terminals to households.

Europeans prefer to access the internet from home (despite highpenetration rates for internet-ready PCs in the workplace). The PC remainsthe access device of choice by a significant margin.

PCs in Use Worldwide, by Region, 1995, 2000, 2001 &2007 (in millions and as a % of total households)

Worldwide

US

Western Europe

Asia-Pacific

1995

229 (35.2%)

94 (36.9%)

62 (39.2%)

44 (29.3%)

2000

530 (43.5%)

162 (49.0%)

139 (48.5%)

139 (35.8%)

2001

603 (45.1%)

175 (50.4%)

158 (49.9%)

166 (38.3%)

2007

1,150 (52.3%)

251 (54.6%)

285 (52.9%)

367 (53.9%)

Source: Computer Industry Almanac (CIA), March 2002


Access Devices Used to Connect to the Internet atHome in the EU, by Country, November 2001

Computer:desktopor laptop

Desktopcomputer

Laptopcomputer

TV set-topbox

(digitalTV)

Videogame

console

Belgium 98.2% 94.0% 13.2% 2.5% 5.9%

Denmark 99.7% 92.8% 16.7% 0.4% 0.4%

Germany 97.8% 92.6% 14.1% 1.8% 2.7%

Greece 92.9% 85.3% 10.7% 0.5% 0.5%

Spain 97.1% 94.7% 7.4% 1.2% 0.6%

France 99.2% 94.5% 8.5% 0.6% 0.8%

Ireland 97.4% 90.5% 12.6% 2.8% 0.5%

Italy 98.4% 87.3% 15.1% 0.4% 0.2%

Luxembourg 99.2% 93.8% 12.7% 0.3% 3.0%

Netherlands 98.5% 95.6% 10.3% 0.3% 0.1%

Austria 96.4% 93.2% 13.2% 1.0% 3.2%

Portugal 98.3% 96.2% 5.6% 0.4% 0.8%

Finland 99.1% 94.6% 8.8% 0.3% 0.0%

Sweden 98.6% 93.7% 15.0% 2.2% 1.1%

UK 96.1% 87.7% 19.3% 9.2% 2.2%

TotalEuropeanUnion

97.7% 91.6% 13.6% 2.8% 1.5%



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To get more data on PC unit sales and revenues in Europe and around the world, read eMarketer’s PC Market Report,TM part of the IT &Telecommunications Spending subscription package. To order copies or subscribe to the three-part series, visit the eMarketer website(http://www.emarketer.com) or send an e-mail to [email protected].

Mobiletelephone

(WAP,GPRS)

Handheld/pocket

computer

Other Don’tknow

Belgium 10.2% 1.9% 0.2% 1.5%

Denmark 2.1% 0.6% 0.0% 0.3%

Germany 10.1% 1.7% 0.8% 1.3%

Greece 0.0% 0.0% 0.0% 6.1%

Spain 1.9% 0.0% 0.6% 1.2%

France 1.9% 0.9% 0.6% 0.1%

Ireland 3.2% 0.5% 0.0% 0.2%

Italy 3.1% 0.1% 0.0% 0.5%

Luxembourg 4.6% 2.6% 0.1% 0.4%

Netherlands 1.7% 0.3% 0.7% 0.3%

Austria 6.6% 1.4% 0.0% 2.7%

Portugal 1.3% 0.0% 0.0% 0.7%

Finland 2.1% 0.1% 0.2% 0.3%

Sweden 5.3% 1.6% 0.1% 1.0%

UK 8.8% 1.4% 0.1% 0.5%

TotalEuropeanUnion

5.8% 1.0% 0.4% 0.8%

Note: Multiple responses acceptedSource: Flash Eurobarometer #112, January 2002




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Televisions (TVs)For the past several years, technology analysts have predicted that the US would remain ahead of Europe in PC-based internet access, but that Europeans (particularly those from wealthier countries) would eclipse Americans in the use of alternative technologies to surf the web,from interactive television (iTV) to mobile phones to dedicated internetaccess devices.

iTV does not necessarily require a digital TV (DTV) connection. After all,interactive TV services have been available for many years over analog TVsignals. The UK’s Teletext service, for example, has been around for over 20years. However, DTV considerably broadens the opportunity for offeringinteractive services on the television and makes it a more viable and cost-effective opportunity for TV providers. With the growing demand fordigital television around the world, and the fact that many nationalgovernments have mandated digital television in the next five years, agrowing number of TV providers are offering interactive TV services.However, to date, this has not translated into widespread use of the TV asan internet access device, although the potential remains given that farmore homes, particularly those at lower income levels, have televisionsthan they do PCs.

eMarketer defines iTV as two-way interactive services designed for theTV. Interactive services can be offered by any type of TV operator (e.g.,cable, satellite and terrestrial broadcast) and can allow viewers to browsethe web, read and write e-mail, conduct instant messaging sessions andengage in many, if not all the same activities they typically perform whenaccessing the internet via a PC. The main difference is that a return path isnecessary, whether it be a dial-up connection, DSL, cable modem, wirelessor an alternative. In addition, internet content is adjusted for TV’s lowerresolution and display capabilities.

Confused about the differences between the various digital TVdistribution platforms and how leading research firms view theirprospects for growth? eMarketer’s Interactive TV: Reality &Opportunity ReportTM can help set you straight. To order copies, visitthe eMarketer website (http://www.emarketer.com) or send an e-mailto [email protected].

Western Europe has a clear edge in iTV, dominating the global market withover 23 million iTV households at the end of 2001 (compared to just 6.9million North American iTV households). Western Europe alone accountedfor 62% of the world’s iTV households, led in large part by the UK, whichhas the highest penetration of digital TV of any single country (50% of UKhouseholds are expected to be connected by the end of 2002. Although theAsia-Pacific region will experience slower growth in digital TV penetrationthan North America and Western Europe through 2005, it will inevitably



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become the largest iTV region in the latter part of the decade, largelybecause it contains half of the world’s TV households.

Comparative estimates indicate that there were between 20 million and 24million iTV households in Europe in 2001. Research firms project this totalto rise to between 70 and 80 million by 2005.

“We don’t believe the broad middle market of[European] internet consumers in the next five to seven years will want to hassle with ISPs, PCconfiguration and cost, and an open Web-surfingexperience when they can effectively have awalled garden that allows shopping, banking,and entertainment services from familiar names,at a low cost, without having to do much more than allow their set-top box provider to push themnew services.” – Andy Greenman of Yankee Group’s Internet

Strategies Europe (ISE) Group

iTV Households Worldwide, by Region, 2001-2005 (inmillions)

2001 2002 2003 2004 2005

North America 6.9 16.1 28.2 43.2 58.3

Western Europe 23.6 32.9 43.3 55.4 69.7

Asia-Pacific 3.8 9.0 18.4 35.6 58.5

Latin America 0.4 1.0 2.1 3.5 5.2

Rest of World 3.8 5.9 8.9 12.6 16.8

Total worldwide 38.4 64.9 100.9 150.3 208.5

Source: Strategy Analytics, 2001


Comparative Estimates: European iTV Households,1999, 2001, 2003 & 2005 (in millions)

1999 2001 2003 2005

Jupiter Research 5.6 20.5 47.3 72.8

Yankee Group – 24.5 – 81.2

International Data Corporation (IDC) – – – 79.0*

Strategy Analytics – 23.6 43.3 69.7

Note: *iTV enabled households. IDC estimates 45% of W. Europeanhouseholds will actually access iTV content in 2005 or 44.1 millionhouseholds.Source: eMarketer, 2002; various, as noted, 2001



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As the following data from Strategy Analytics illustrate, the UK is theregional leader in digital television adoption. One of the reasons the UK hasa particularly high penetration of digital and interactive TV is becauseconsumers, in many cases, have three digital platforms from which tochoose–satellite, cable and terrestrial. These options have made the UK iTVmarket very competitive and have contributed to the increasingsophistication of iTV services.

Other European countries continue to lag far behind (although JupiterMedia Metrix predicts that 25% of all European households with have DTVby the end of this year). In some countries, Germany in particular, StrategyAnalytics notes that regulatory constraints have delayed the deployment ofDTV services. In the Nordic markets, which otherwise display extremelyhigh penetration rates for fixed-line and wireless phones as well as internetusage, DTV adoption is low by comparison. The Yankee Group believes thatin countries where PC penetration is low, iTV may succeed as an alternative(and perhaps lower-cost) means of accessing the internet, but in countrieswith high PC and internet penetration rates, iTV will simply develop intoan additional, but not alternative access technology.

Digital TV Adoption in Selected European Countries,2001 (as a % of households)

UK 37%

Denmark 26%

Sweden 23%

Norway 23%

Spain 20%

Ireland 17%

Europe average 16%

France 16%

Italy 13%

Netherlands 10%

Germany 8%

Switzerland 8%

Portugal 6%

Austria 5%

Finland 4%

Greece 3%

Belgium 3%

Note: includes all platforms: satellite, cable, terrestrial and DSLSource: Strategy Analytics, January 2002



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It bears repeating that although Europeans increasingly have access todigital TV and are adopting the technology in growing numbers,consumers so far seem to care very little about the ability to use theirtelevisions to access the internet. Even Jupiter Media Metrix, whichprojects that 91% of European DTV households will be using some kind ofinteractive service (although not necessarily or exclusively the internet) by2007, cautions that revenues derived from iTV services will remainsignificantly lower than those from the PC-based internet in the near term.

Interactive TV is finally reaching its potential. To make the most of the opportunity, get eMarketer’s Interactive TV: Reality &Opportunity Report.TM To order copies, visit the eMarketer website(http://www.emarketer.com) or send an e-mail to [email protected].

PDAs and Other Internet Access DevicesIn addition to PCs and digital TV, Europeans can access internet servicesthrough a wide range of devices, including PDAs, and dedicated webappliances and smartphones. Not everyone will use PDAs to connect to theinternet, but having the potential to log on through devices other than justthe traditional PC increases the propensity and intensity of surfing.

While Microsoft’s Windows is by far the world’s leading operatingsystem and is used on 88% of personal computers, the PDA market has notyet come to be dominated by a single platform vendor. Palm and Microsoftare continuing to compete for the preeminent position, with theirrespective Palm OS and Pocket PC operating systems. Other platforms,including Symbian OS, held a small share of the handheld OS market in2001 as well, although Symbian’s roots lie in the mobile telephone market.

From the perspective of the user, the Palm and Microsoft platforms havediffering philosophies toward the PDA, with each offering separateadvantages and disadvantages. In general, handhelds that run on the PalmOS are less expensive, simpler, smaller and more efficient with batterypower. By contrast, Pocket PC handhelds offer more features, fasterprocessors and larger screens, all of which come at the expense of a muchshorter battery life and higher prices. Perhaps more important, thedifference in functionality and price between the two platforms hasattracted two distinct audiences: the Pocket PC handhelds havepredominately attracted business users, while the Palm OS handhelds areattractive to a wider consumer audience.



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Palm OS devices were initially designed to serve as personal organizers buthave since developed the ability to add multimedia features such as audioand color graphics. On the other hand, Pocket PC devices were designed toappear as a version of the common, PC-based Windows operating systemshrunk down to a handheld form. By most accounts, Pocket PCs providesuperior multimedia capabilities, but are more complicated to use.

According to eTForecasts, the installed base of PDA units in WesternEurope will increase by a CAGR of 39.5% between 2000 and 2006, reaching27.5 million units by 2006. Compared to other world regions, however,eTForecasts estimates that Europe will trail both the United States and theAsia-Pacific region, which will have as many as 68.3 million and 55.2million PDAs in use by 2006, respectively.

To learn more how handheld devices sales in Europe stack up with therest of the world, buy eMarketer’s PDA Market Report. To order copies,visit the eMarketer website (http://www.emarketer.com) or send an e-mail to [email protected].

PDAs in Use in Western Europe, 2000, 2002, 2004 &2006 (in millions of units)

2000 3.7

2002 9.3

2004 17.4

2006 27.5

Source: eTForecasts, 2001




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D. Internet Infrastructure

Network CapacityEurope has a well-developed information technology (IT) infrastructure,but it still lags well behind that of North America. This explains whyservice quality in Europe is often lower than in North America (albeitconsiderably better than in Asia or Australia). For example, in Europe, theaverage response time−the time required for a mass of data to make around trip from point A to point B−is more than two times as slow as theaverage response time in North America, but almost twice as fast as in Asiaor and one-and-a-half times as quick as in Australia.

The growing use of the internet for trans-continental and inter-regionalcommunication and business have required an increasing supply ofinternational bandwidth. According to the Washington, DC-based researchorganization TeleGeography, network capacity tripled between 2000 and2001 (after quadrupling in 1998 and 1999), increasing to the point thatdemand, while still growing, has not kept pace with supply.

Average Response Time, Packet Loss (past 30 days)and Number of Routers Worldwide, by Region, March2002

Average response time(in milliseconds)

Averagepacket loss

# of routers

Asia 343 2% 33

Australia 272 0% 11

Europe 191 2% 48

North America 76 3% 153

Latin America 184 6% 14

Note: Data based on average of 30 days prior to 4 March 2002Source: Internet Traffic Report, March 2002



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Among hub cities, as measured by the quantity of internet capacity thatconnects urban centers to other regions around the world, New Yorkremains far and away the world leader, with 71 direct links to othercountries. In Europe, London, with 61 direct connections, plays a similarrole, leading third- and fourth-place Amsterdam and Paris by aconsiderable margin. Although four European cities rank in the top 10, theUS remains the hub for much of the world’s internet infrastructure, and isthe major conduit for internet traffic between Europe and Asia.

Internet HostsThe number of local hosts, while not a perfect measure of the extent of localcontent, does point to the presence of websites in a particular country. Hostcounts in Europe’s leading internet markets have shown steady increases inthe past year. Many grew by nearly 50% between January 2001 and January2002, while internet hosts in Poland increased by nearly 100%, indicative ofthe country’s considerable advance in internet infrastructure.

Top 10 Inter-regional Internet Hub Cities, byInter-regional Internet Bandwidth, 2001 (in Mbps)

Inter-regional internetbandwidth

1. New York US 149,989.5

2. London UK 85,518.7

3. Amsterdam Netherlands 24,479.6

4. Paris France 22,551.8

5. San Francisco US 20,813.6

6. Tokyo Japan 16,745.5

7. Washington, DC US 13,261.2

8. Miami US 11,912.4

9. Los Angeles US 11,227.0

10. Copenhagen Denmark 10,417.0

Source: TeleGeography, Inc., 2001



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Note that differences in host counts do not necessarily mean a dearth ofinternet content. For example, the US tends to be a hub for online activitythat originates elsewhere, so many hosts for companies located in Europemay actually reside in the US.

Internet Hosts in Selected European Countries,January 2000, January 2001 & January 2002

January 2000 January 2001 January 2002

Denmark 336,928 435,556 707,141

Finland 631,248 771,725 944,670

France 779,879 1,229,763 1,670,694

Germany 1,702,486 2,163,326 2,681,325

Italy 658,307 1,630,526 2,282,457

Netherlands 820,944 1,309,911 1,983,102

Norway 401,889 525,030 629,669

Poland 183,057 371,943 654,198

Russia 214,704 298,014 393,595

Spain 415,641 663,553 1,497,450

Sweden 594,627 764,011 1,141,093

UK 1,901,182 2,291,369 2,462,915

Source: Network Wizards, 2000-2002



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However, as with other facets of Europe’s technology infrastructure, adisparity exists between Northern and both Southern and Eastern Europe.In this case, it is measured by the difference in host counts. The RIPENetwork Coordination Center’s latest tally of top level domains points to amore favorable people-to-host ratio in Scandinavian countries, despite themuch greater overall number of hosts in countries such as Germany andthe UK.

Host Penetration of Top Level Domains in Europe,January 2002

People/host

Population % ofall TLDs

population

Realhosts

% ofall TLDs

realhosts

Finland 6 5,154,000 0.37% 897,863 5.47%

Netherlands 6 15,678,000 1.13% 2,452,505 14.94%

Denmark 10 5,270,000 0.38% 543,488 3.31%

Sweden 12 8,875,000 0.64% 762,404 4.64%

Switzerland 14 7,299,000 0.53% 533,902 3.25%

Norway 14 4,419,000 0.32% 307,953 1.88%

Austria 25 8,140,000 0.59% 330,691 2.02%

UK 26 58,649,000 4.24% 2,297,148 13.99%

Belgium 26 10,141,000 0.73% 391,162 2.38%

Estonia 27 1,429,000 0.10% 53,283 0.33%

Germany 33 82,133,000 5.94% 2,487,665 15.15%

Spain 36 39,628,000 2.86% 1,087,911 6.63%

Portugal 45 9,869,000 0.71% 217,060 1.32%

CzechRepublic

47 10,282,000 0.74% 217,197 1.32%

Hungary 60 10,116,000 0.73% 169,419 1.03%

France 65 58,683,000 4.24% 896,800 5.46%

Italy 71 57,369,000 4.15% 810,169 4.94%

Greece 72 10,600,000 0.77% 147,303 0.90%

SlovakRepublic

73 5,377,000 0.39% 73,814 0.45%

Poland 84 38,718,000 2.80% 458,345 2.79%

Russia 426 147,434,000 10.66% 346,131 2.11%

Note: HIGHER penetration is indicated by a LOWER number of people/hostSource: RIPE NCC, January 2002



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Internet Service Providers (ISPs)Dial-up access will continue to grow among both residential and businessinternet subscribers. Even through 2006, it will remain the region’s primaryaccess technology, according to a Yankee Group study. The research firmpredicts that flat-rate pricing, which has been such a boon for internetusage in the US, will begin to diffuse from the UK to the rest of Europe in2002. This trend will help dial-up access to remain entrenched among theregion’s internet users.

Incumbent telecommunications operators are among the leading ISPs inEurope. Joining the group are two companies (AOL Europe and Tiscali) that just provide access. Separate studies by According to the Yankee Groupand investment bank ABN AMRO,have identified the following the top fiveTier 1 ISPs are the followingas the market leaders:

■ AOL Europe■ Tiscali■ Terra Lycos■ T-Online■ Wanadoo

Residential and Business Dial-up Internet AccessSubscribers in Western Europe, 2001 & 2006 ( inmillions)

2001

19.7

29.8

2006

8.5

12.8

Residential Business




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Together, these five companies control 57% of the access market inEurope’s five leading economies (France, Germany, Italy, Spain and theUK), with 23.6 million subscribers as of Q3 2001.

The Yankee Group notes that the rise of traditional telecommunicationsfirms in the internet access market (T-Online is backed by DeutscheTelekom, France Télécom controls Wanadoo and Spain’s Telefónica is theparent of Terra Lycos) signals consolidation in this arm of the telecommarket as well. With the decline in influence and market presence of freeISPs, the smaller field of players will likely result in a less competitivemarket for both consumer and business users.

Tier 1 Internet Service Provider (ISP) Market Share forSelected European Countries, Q3 2001

Marketshare

France 75%

Germany 74%

Italy 23%

Spain 55%

UK 43%

Dominanttier 1 ISPs

-Wanadoo-Tiscali (Liberty Surf)-T-Online (Club-Internet)-AOL Europe

-T-Online-Tiscali-AOL Europe

-Tiscali

-Terra Lycos-T-Online (Ya.com)-Tiscali

-Wanadoo (Freeserve)-Tiscali (LineOne, TinyOnline, WorldOnline)-AOL Europe



Internet Access Subscribers in Selected EuropeanCountries, Q3 2001 (in millions and as a % of totalinternet access subscriber market)

Tier 1 ISP subscribers 23.6 (57%)

Total internet access subscribers 41.3 (100%)

Source: Yankee Group, December 2001



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Although European ISPs continue to make forays into other areas, a recentYankee Group update to the above-mentioned report concluded that theycontinue to earn the bulk of their consumer-based revenue from accesscharges rather than content, e-commerce or other value-added services. Asnoted in the sections on broadband and access devices above, growth indial-up internet access will begin to slow in next three to four years as DSLand cable modem access emerge as increasingly viable and attractivealternatives and as consumers begin to connect to the internet from devicesother than solely the PC.

TerraLycos

3%

2000 2001TerraLycos

5%

Others56%

Others35%

AOLEurope11%

AOLEurope

10%

Freenet4%

Freenet4%

Tiscali4%

Tiscali15%

Wanadoo5%

Wanadoo11%

T-Online17% T-Online

20%

European Union Internet Access Market, by InternetService Provider (ISP), 2000 & 2001

Source: ABN AMRO, 2001


Internet Access Revenues in Selected EuropeanCountries, 2001-2006 (in millions)

2001 2002 2003 2004 2005 2006

France $650.0 $783.0 $909.0 $1,038.0 $1,177.0 $1,240.0

Germany $1,229.0 $1,530.0 $1,864.0 $2,195.0 $2,374.0 $2,540.0

Italy $294.0 $400.0 $575.0 $750.0 $869.0 $939.0

Spain $302.0 $398.0 $519.0 $641.0 $728.0 $809.0

UK $891.0 $1,041.0 $1,352.0 $1,515.0 $1,690.0 $1,793.0



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Since the publication of eMarketer’s November 2001 Europe Online Report,TM

the region’s economy, as noted in Chapter II, has continued to slow, and thenumber of publicly released comparative estimates has dwindled. Most firmshave concentrated on the larger and more developed markets of WesternEurope, which promise more immediate returns than the less developedeconomies of Eastern Europe. The data below reflect that bias.

For earlier comparative estimates, please see the April and November2001 Europe Online Reports or subscribe to eMarketer’s eStat Database.

eMarketer reaffirms its projection that pan-European e-commerce revenueswill increase from $169.81 by the end of this year to nearly $1 trillion byyear-end 2004. Ongoing investment in the region’s ICT infrastructure inspite of economic distress and a growing internet user populationconstitute positive signs for Europe’s consumer and business-to-business(B2B) e-markets.

eMarketer’s estimates are supported by a recent study by the EuropeanInformation Technology Observatory (EITO). In February 2002, EITOreleased figures indicating that total e-commerce in Western Europe alone(remember that eMarketer’s projections apply to the entire region) will risefrom EUR 172 billion, the total for 2001, to EUR 1,682 billion in 2005.EITO’s optimism is based on increasing take-up of e-business tools andapplications in the B2B segment.

E-Commerce Revenues in Europe, 2000-2004 (inbillions)

2000 $34.30

2001 $68.89

2002 $169.81

2003 $415.97

2004 $979.83



E-Commerce Revenues in Western Europe, 2001 &2005 (in billions of €)

2001 €172

2005 €1,682

Source: European Information Technology Observatory (EITO), February2002



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Data from Pro Active International come from the firm’s semi-annual studyof internet users (individual consumers as well as corporate users) in thefollowing European countries: Austria, Belgium, Denmark, Finland, France,Germany, Ireland, Italy, Norway, Spain, Sweden, Switzerland, theNetherlands and the United Kingdom. What they show is that whileindividual consumers made more than double the number of purchases thancorporate users or businesses, the dollar value of the latter, in both absoluteand per purchase terms, was higher by a significant margin. This isunsurprising given that businesses tend to buy in larger quantities and on amore regular, recurring basis than individual consumers, who buy online on a discretionary basis. In other words, they do so primarily to satisfywants rather than needs. Note also that Pro Active’s combined B2C and B2Be-commerce revenue figure for 2001 aligns closely with eMarketer’s.

Western Europe’s share of total worldwide e-commerce revenues remainedwell below that of the US in 2001, but most research firms expect Europe’sportion to grow significantly by the middle of the decade. According toeMarketer’s projections, as seen in the second chart below, Europe shouldbegin to close the gap around 2004.

Business and Consumer E-Commerce in Europe, 2001Consumer Business

Number of purchases 265 million 100 million

Value of purchases €28 billion €40 billion

Source: Pro Active International, 2001


ROW8.7%

Asia-Pacific6.1%

Japan15.8%

Western Europe25.7%

US43.7%

Distribution of E-Commerce Revenues Worldwide, byRegion, 2001




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As the chart below demonstrates, much of the growth could come fromsmall and medium-sized firms, particularly as these connect with theirsupply and distribution networks over the internet. Falling prices foroutsourced services will facilitate this process.

E-Commerce Revenues in Europe and the US,2001-2004 (in billions)

2001

$68.89

$355.32

2002

$169.81

$557.08

2003

$415.97

$821.27

2004

$979.83

$1,137.17

Europe US




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SME E-Business Revenues Worldwide, by Region,2001, 2003 & 2006 (in billions)

EMEA*

$1.44

$6.53

$28.53

Asia-Pacific

$32.09

$127.25

$502.69

Latin America

$5.97

$23.51

$89.81

Western Europe

$116.44

$340.41

$971.37

North America

$133.22

$384.36

$1,181.42

2001 2003 2005

Note: *Europe, Middle East, AfricaSource: AMI-Partners, November 2001


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A. Revenue Forecasts 111

B. Stage of E-Business Development 114

C. Use of E-Business Software and Services 134

D. Participation in Online Exchanges 143



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Compared to the business environment in the United States, Europeancompanies face the added challenge of selling their goods and services intoa common market that in many ways remains a collection of disparatebusiness customs and local regulations. Despite the smooth introduction ofthe euro over the past three years, regional and national differencescontinue to persist in Europe, often bringing an added level of complexity tothe development of e-business initiatives that must cross multiple borders.

“The relatively small size and variety of nations in Europe, combined with recent merger,acquisition and partnering activity, increases the need for cross-border optimization comparedwith other continents.”– Mike Laphen, Computer Sciences Corporation

In the face of these obstacles, European companies have surprised manyindustry observers in 2001, with what has been described by many as theirunexpected embrace of e-business technologies. Large enterprises in theUnited Kingdom, Germany, Benelux and Scandinavia have reportedly ledthe way, as they have been best prepared to build upon previoustechnology investments and begin to develop external, internet-basedconnections with their trading partners.

Not surprisingly, e-business projects in Europe tend to first be developedwithin national borders, and then gradually rolled out to large enterprises’key trading partners in other parts of the continent. However, e-commercereadiness is not always tied to national markets, as the development of e-business initiatives often depends upon the relative preparedness ofindividual industries.

The Swedish Trade Council, for example, lists the IT, telecommunications,and chemicals industries as being better-equipped to participate in cross-border e-commerce ventures than their counterparts in the restaurantor construction industries. On the other hand, this has not stopped localizede-business exchanges from being developed, and often meeting with somedegree of success. Indeed, Europe may lead North America when it comesto the development of local e-commerce exchanges that must also integratewith larger, regional exchanges.


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A. Revenue ForecastsIn light of the above and other signs of European strength, eMarketercontinues to forecast that business-to-business e-commerce will reach anestimated $797.3 billion in Europe by 2004. Germany will account for thelargest portion of online trade, at $230.7 billion in 2004, followed by theUnited Kingdom at $214.0 billion.

Compared to other research firms’ revenues forecasts, eMarketer’sprojections remain among the most conservative. This is due in part toeMarketer’s tighter definition of e-commerce, which includes only internet-based transactions. While some researchers include traditional EDI withintheir forecasts, for example, eMarketer includes only web-EDI. eMarketeralso excludes the transaction of business services via the internet from itsforecast, while some industry analysts, such as Forrester and AMR, includebusiness services in theirs.

Although eMarketer does not include traditional EDI in its e-commerceforecasts, it is nevertheless worth noting that under no circumstances is itabout to be displaced by pure internet-based transactions in the near term.Many large companies have made considerable investments in EDInetworks that they expect to continue using over the next several years asthey develop web-based channels for connecting with their tradingpartners. As a means of extending the longevity of these EDI investmentsand amortizing their sunk costs, large businesses are currently web-enabling their smaller suppliers, so that small and mid-size companies thatwere formerly shut out of EDI are now able to participate in electronic tradewith their larger trading partners via the internet.

EDI is not expected to fade from existence for at least another 10 to 15years. However, other electronic trading alternatives have begun to slowlychip away at the large EDI networks of old. From consortia-led exchangesthat are building out hosted e-commerce networks to private tradingexchanges that are being developed by large businesses, internet-based e-commerce networks have better functionality and are much less expensiveto operate than EDI systems.

B2B E-Commerce Revenues in Europe, 2000-2004 (inbillions)

2000 $26.24

2001 $52.42

2002 $132.74

2003 $334.14

2004 $797.29




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By comparison, IDC predicts that business-to-business e-commerce inEurope will increase by a compound annual growth rate of 91% between2001 and 2005, to reach $1.46 trillion, while the Gartner Group predicts thatinternet e-commerce between businesses will grow to $1.64 trillion by 2005.

Note that, like eMarketer, IDC does not include EDI transactions that areconducted through the value added networks (VANs) of third-party serviceproviders such as GE Global Exchange Services, IBM, or Sterling Commerceas part of its e-commerce forecast. However, IDC does include web-EDI aspart of its e-commerce projections. As an indication of the weight web-EDIcarries in the mix of online commerce, IDC estimates that it accounts for33.3% of all e-commerce activity on a global level.

AMR Research includes EDI as well as internet-based transactions in itsforecast for business-to-business e-commerce in Europe. The research firmpredicts that Western European e-commerce activity will increase by acompound annual growth rate of 89% between 1999 and 2004, to reach$4.29 trillion by 2005.

B2B E-Commerce Revenues in Europe, 2000 & 2005 (inbillions)

2000 $57.0

2005 $1,460.0



B2B E-Commerce Revenues in Europe, 2001 & 2005 (inbillions)

2001 $177

2005 $1,641

Source: Gartner Inc., 2001


B2B E-Commerce Forecast (Internet and EDITransactions) for Europe, 2001-2005 (in billions)

2001 $372.00

2002 $760.00

2003 $1,479.00

2004 $2,662.00

2005 $4,298.00

Note: includes trade in goods and servicesSource: AMR Research, 2001



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E-Commerce in Eastern EuropeAs with internet usage and penetration rates for key internet-relatedtechnologies, e-commerce in Eastern Europe lags far behind WesternEurope, which will generate the great majority of revenues over the nextfive years. As a share of global business-to-business e-commerce, AMRResearch estimates that Western Europe will account for 22% of worldwidetrade in 2005, up from its 14% share in 2000. AMR Research has also goneon to forecast e-commerce activity for Eastern Europe, which it believeswill increase by a CAGR of 90%, from $7 billion in 2000 to $182 billion by2005. Eastern Europe, however, will make up a relatively small portion ofglobal business-to-business e-commerce, accounting for just 1% ofelectronic trade worldwide by 2005.

Similarly, IDC predicts brisk growth in B2B e-commerce revenues inwhat it terms Central Europe (comprised of Poland, Hungary and the CzechRepublic). However, this growth will be from a rather small base, hence theCAGR of 180% between 2001 and 2006. The portion of revenues comingfrom e-marketplaces will also show steep increases, rising from 13% in2001 to 31% in 2006. According to IDC, much of this e-marketplace activityis taking place in Poland, whose industry leaders are farther along in theiradoption of e-business practices than their counterparts in the CzechRepublic and Hungary.

IDC likewise forecasts brisk e-commerce growth for Southeastern Europe,comprised of Bulgaria, Croatia, Romania and Slovenia, where internetpenetration rates vary widely. B2B (and B2C, for that matter) e-commercehas so far been minimal, but IDC predicts that it will nonetheless accountfor the lion’s share of the $650 million in total e-commerce generated bySoutheastern Europe in 2005.

B2B E-Commerce in Central Europe, 2001 & 2006 (inbillions)

2001 $1.25

2006 $23.00

Source: International Data Corporation (IDC), April 2002



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B. Stage of E-Business DevelopmentDespite common misgivings that European businesses lag their Americancounterparts in terms of technology adoption, a mid-2001 study byAccenture has found that European companies are in fact closing thetechnology gap with the United States. Although American firms are a littlefarther up the e-business road, Accenture estimates that Europe’s adoptionof e-commerce technology trails the United States by just 12 months.

In Europe’s three largest economies, France, Germany and the UK, the lagis less significant. According to the January 2002 Net Impact Study, a projectconducted by Hal Varian of the University of California-Berkeley, Robert E.Litan of The Brookings Institution and Momentum Research Group, andsponsored by Cisco Systems, organizations in the three Europeanpowerhouses expect to complete their planned internet business solutiondeployments in 2003, an almost identical timeframe as similar firms in theUS. The European firms surveyed for the Net Impact Study estimate thatthrough 2001, they saved EUR 9 billion by rolling out e-business solutions,with an expected total of EUR 88 billion in savings by 2010.

The Net Impact Study was based on telephone interviews completed inSeptember and October of 2001. A total of 2,699 companies andorganizations were interviewed for the study (2,065 in the United States,634 in the United Kingdom, France and Germany). The sample in bothstudies was selected from Dun & Bradstreet’s database of global businesses.For the purposes of the study, the researchers defined internet businesssolutions as any initiatives that combine the internet with networking,software, and computing hardware technologies to enhance or improveexisting business processes or create new business opportunities.

According to the Computer Sciences Corporation’s survey of European ITprofessionals, businesses in Europe have made the optimization ofenterprise-wide IT systems their number one priority in 2001. In particular,European companies want to use their IT systems more effectively, and theyhave also made priorities of updating obsolete technologies and connectingelectronically to their external trading partners, be they customers orsuppliers. A recent Gartner survey came to the same conclusion.

Five Priority Spending Areas for European CorporateIT Departments, 2002 (as a % of respondents)

Integration and consolidation projects 13.1%

Systems architecture and planning 12.6%

Network and communications 10.9%

E-commerce 10.4%

Systems upgrades 10.2%

Source: Gartner, March 2002



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Not unlike the majority of enterprises in North America, almost 70% ofEuropean companies’ e-business projects are focused upon developingexternal relationships, although businesses in Europe have placed a muchgreater emphasis upon reaching new customers, while North American firmshave prioritized their need to strengthen existing customer relationships.

This latter difference may be attributed to the divergent economicclimates between each region during 2001. Because of the economicslowdown, businesses in the US have shifted their priorities from growth tocustomer retention, whereas European companies have not felt sucheconomic pressure as intensely, and have therefore continued to focusupon expanding their businesses. For example, according to an October2001 study by Accenture, 60% of European executives surveyed respondedthey plan to increase expenditures on e-commerce initiatives in theupcoming year. Only 4% responded that they intend to decrease spending.

Decrease4%

No change36%

Increase60%

European Expenditure Plans for E-CommerceInitiatives within the Next Year, 2001 (as a % ofEuropean executives)

Source: Accenture, October 2001



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A more recent study by Taylor Nelson Sofres Information Technology(TNS-IT), based on a survey of 555 companies in three European countries(Denmark, France and the UK), Japan, Singapore and the US, found thatinternet-related expenditures would increase in the year ahead amongDanish and French companies, but decrease among those in the UK. This isdue in part to high levels of investment in e-business solutions by Britishfirms in the past few years.

In other business surveys, eMarketer has also found that several largecompanies have prioritized the need to get their internal houses in orderprior to building out their external e-business connections. According tothe CSC survey, European companies tend to emphasize externalrelationships in their e-business strategies, aiming particularly to reachnew customers.

Plans for Internet-Related Expenditures over the NextYear among Companies in Denmark, France and theUK, 2001 (as a % of respondents)

Denmark

49%

51%

France

56%

40%

4%

UK

10%

24%

66%

Global weighted total

26%

32%

42%

Increase Stay the same Decrease

Source: Taylor Nelson Sofres, February 2002


Primary Focus of E-Business Strategies among LargeEuropean Companies, 2001

Internal operations 31.0%

External relationships 69.0%




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Likewise, the Accenture study shows that e-business initiatives are mostprevalent among customer-facing departments such as sales andmarketing. In most instances, however, businesses have chosen to pursueboth internal and external e-business initiatives simultaneously, with theaim of integrating their e-business projects as part of a more holistic,enterprise-wide strategy.

Top E-Business Strategic Objectives among NorthAmerican and European CIOs, 2001

North AmericaStrengthen customer loyalty 47.6%

Improve productivity 43.4%

Reduce costs 41.8%

Europe

Reach new customers 65.4%

Offer new products and/or services 54.3%

Reduce costs 53.9%



European Business Lines Using E-CommerceInitiatives, 2001 (as a % of European executives)

Sales and marketing 82%

Purchasing 56%

Human resources 46%

Logistics 44%

Source: Accenture, October 2001



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Similarly, the TNS-IT study, which reported data for businesses in Denmark,France and the UK, found that companies were more likely to use the internetfor dealing with customers than for internal purposes (thus confirming theAccenture and CSC findings). Marketing and other revenue-drivers were thechief applications for enterprises in the above three countries. Note thatFrance was the laggard of the group in most respects. This is line with thelevel of the country’s overall internet development, which is somewhatbehind that of the UK and other Northern European countries.

When looking at adoption rates of internet business solutions by industry,as the Net Impact Study has done for France, Germany and the UK, the datashow some variation. Although customer service and marketing wereamong the leaders across the board, the survey shows that companies in thehealthcare sector, for example, are using the internet to manage humanresources functions, while financial services firms have employed web-based solutions in their finance and accounting departments.

External and Internal Use of the Internet byBusinesses in Denmark, France and the UK, 2001 (as a% of respondents)

Denmark France UK

Dealing with customers (any used) 75% 36% 86%

Marketing 59% 9% 73%

CRM/customer service 34% 19% 51%

Selling goods and/or services 22% 4% 51%

Order fulfillment 11% 11% 29%

Internal purposes (any used) 25% 29% 59%

Training 18% 8% 35%

Knowledge management 9% 21% 46%

Employee schedule management 7% 4% 27%

Supply chain management 4% 1% 21%




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Breaking out organizations by size, it is clear that large companies (thosewith 5,000 or more employees) are generally farther along in their adoptionof e-business solutions for both internal and external functions. However,nearly all the businesses surveyed in France, Germany and the UK arerelatively far along in their use of the internet for marketing, customerservice and e-commerce purposes.

Adoption of Internet Business Solutions byBusinesses in France, Germany and the UK, byIndustry, 2001 (as a % of respondents)

E-Marketing

Customerservice/support

E-Commerce

Finance/Accounting

Humanresources

Procure-ment/MRO

Sales forceautomation

Supply chainmanagement

Health-care

22%

51%

36%

24%

35%

0%

–

–

Whole-sale/retailtrade

61%

50%

47%

20%

12%

30%

22%

15%

Manu-fac-

turing

54%

53%

42%

18%

18%

33%

14%

11%

Finan-cialser-

vices

48%

75%

42%

61%

20%

16%

10%

6%

Serviceproviders/Telecom-

muni-cations

47%

74%

39%

26%

29%

31%

27%

17%

All otherindustries

48%

57%

41%

34%

38%

27%

14%

10%

Source: Net Impact Study, January 2002



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According to the CSC study, 22.3% of European businesses believe that they have fully-implemented their e-business strategies, compared to just5.8% of North American companies. This difference may be attributable tothe perceived complexity of e-business strategies, which, for many firms,become increasingly sophisticated as they enter into more advanced stages oftheir implementations.

Adoption of Internet Business Solutions byBusinesses in France, Germany and the UK, byBusiness Size, 2001 (as a % of respondents)

100 orfewer

101-200

201-500

501-1,000

1,001-5000

5,001+

E-Marketing 52% 47% 50% 62% 40% 74%

Customerservice/support

47% 59% 57% 71% 42% 86%

E-Commerce 43% 36% 41% 47% 35% 62%

Finance/accounting

20% 18% 27% 32% 36% 56%

Humanresources

19% 27% 23% 32% 24% 51%

Procurement/MRO

26% 29% 18% 21% 37% 53%

Sales forceautomation

7% 18% 19% 22% 34% 21%

Supply chainmanagement

11% 19% 8% 8% 4% 8%



No strategy5.1%

Currently planning30.8%

Currently implementing41.8%

Fully implemented22.3%

E-Business Strategy Implementation among LeadingEuropean Companies, 2001




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By comparison, the Net Impact Study found that adoption rates of internetbusiness solutions in Germany and the UK were similar to the US. France,meanwhile, lagged behind by a considerable margin.

As an indication of the divergent levels of e-business development betweenNorth American and European firms, the former have placed a much higherpriority upon information security than their European counterparts. WhileNorth American respondents to the CSC study ranked security as theirnumber two IT priority in late 2001, IT professionals in Europe rankedsecurity as number ten.

Although CSC is careful to note that this greater concern withinformation security among North American business may be tied to aheightened perception of security threats in general, it is also indicative ofthe extent to which large businesses there have opened themselves up tonew vulnerabilities, as they have built out their “extended enterprise”capabilities. As European companies continue along this same path, theywill probably become less likely to consider their e-business projects ashaving been fully implemented.

Use of Internet Business Solutions among Companiesin France, Germany, the UK and the US, 2001 (as a % ofrespondents)

France Germany UK US

Currently using 29% 54% 57% 61%

Plan to use 8% 10% 8% 8%

No plans to use 63% 36% 36% 30%




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Data from the Eurobarometer study reinforces this contention. Among the8,141 European companies surveyed, 45% had experienced internet-relatedsecurity problems in the six months prior to being polled. Virusesconstituted the greatest and most frequent threat. The study also noted thatthe likelihood of encountering security problems increases with the size ofthe company. Most European enterprises have taken some protectivemeasures, with 8 in 10 adopting virus scans and 4 in 10 using firewalls (theincidence of this latter also rise with the size of the company).

Security Problems Encountered by EuropeanCompanies, by Business Size and Sector, 2001 (as a %of respondents)

Viruses Illegalaccess

Denialof

service

Deface-ment

of webserver

Businesssize

SME (10-49) 37.1% 3.9% 7.2% 3.5%

SME (50-249) 51.5% 5.8% 8.5% 2.9%

Majors (250+) 56.5% 9.1% 8.8% 4.3%

Sector

Services 45.4% 6.2% 9.8% 3.6%

Distribution 40.2% 4.8% 7.0% 3.1%

Manufacturing 42.1% 3.0% 7.1% 4.3%

Construction 23.8% 3.9% 5.6% 2.0%

Total EU-15 39.6% 4.3% 7.4% 3.5%

ID misrepresen-tation/theft

Occupationof domain

name

Others None

Businesssize

SME (10-49) 2.0% 2.4% 0.6% 56.8%

SME (50-249) 1.3% 3.0% 0.4% 43.0%

Majors (250+) 5.1% 5.1% 0.6% 36.7%

Sector

Services 3.2% 3.9% 0.6% 47.0%

Distribution 2.9% 2.9% 0.7% 53.8%

Manufacturing 1.4% 1.4% 0.5% 53.1%

Construction 3.2% 3.2% 0.5% 69.0%

Total EU-15 2.0% 2.6% 0.6% 54.4%

Note: Don’t know/No answer (DK/NA) amounted to 1.0% of responsesSource: Flash Eurobarometer #116, December 2001



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Beginning at the most basic level−the availability of an internet connectionin the workplace and site on the web−most European countries arerelatively far along. According to the most recent Flash Eurobarometerstudy of European enterprises, carried in out in November and December of2001, almost 90% of companies in the EU-15 with 10 or more employeeshave an internet connection and around 70% have a functioning website.For the EU-wide study, 8,141 managers (typically senior leaders in thefinancial or IT department of their firms) in three categories of companysize (10-49 employees, 50-249 employees and 250+ employees) and fourindustrial sectors (services, distribution, manufacturing and construction)across the region.

Measures Taken by European Companies to ProtectAgainst Security Problems, by Business Size andSector, 2001 (as a % of respondents)

Firewall Virusscanner

Intrusiondetector

SSLserver

site

Others None/don’t

know/no

answer

Business size

SME (10-49) 33.6% 81.0% 22.4% 8.7% 4.7% 14.2%

SME (50-249) 52.2% 87.1% 32.3% 13.4% 3.9% 8.9%

Majors (250+) 77.0% 89.8% 50.3% 24.7% 3.3% 7.2%

Sector

Services 50.2% 86.0% 32.8% 15.6% 5.5% 9.9%

Distribution 39.7% 81.7% 24.5% 9.7% 4.0% 12.8%

Manufacturing 31.8% 81.5% 22.5% 9.0% 4.4% 13.7%

Construction 28.8% 78.6% 19.0% 3.9% 4.9% 18.0%

Total EU-15 37.4% 82.1% 24.6% 9.8% 4.6% 13.3%

Note: Multiple responses acceptedSource: Flash Eurobarometer #116, December 2001



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As is to be expected, the size of the company corresponds closely to itsinternet connectivity and web presence. At the sectorial level, constructioncompanies lag behind their counterparts in services, distribution andmanufacturing in having a website, while at the country level, less than60% of firms in Greece, France, Portugal and Spain have a website.

European Companies with an Internet Connection, byBusiness Size and Sector, 2001 (as a % ofrespondents)Business sizeSME (10-49)

87.9%

12.1%

SME (50-249)

95.1%4.9%

Majors (250+)

98.3%1.7%

SectorConstruction

86.2%

13.8%

Distribution

88.2%

11.8%

Services

89.6%

10.4%

Manufacturing

90.7%

9.3%

Total EU-15

89.0%

11.0%

Yes No

Source: Flash Eurobarometer #116, December 2001



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European Companies with a Website, by BusinessSize and Sector, 2001 (as a % of respondents)Business sizeSME (10-49)

68.0%32.0%

SME (50-249)

79.7%

20.3%

Majors (250+)

88.8%

11.2%

SectorConstruction

58.0%

42.0%

Distribution

69.4%

30.6%

Manufacturing

72.6%

27.4%

Services

75.8%

24.2%

Total EU-15

70.2%

29.8%

Yes No

Source: Flash Eurobarometer #116, December 2001



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As a means of reaching additional trading partners, the majority ofEuropean businesses use their websites primarily to inform others abouttheir company and products. Since the year 2000, there has been asignificant increase in the percent of European websites that are able tooffer delivery capabilities to their customers, but there has also been asurprising dip in the number of websites that provide interactivecapabilities with a company’s customers.

The percentage of companies with a website that allows customers thepossibility to buy goods and/or services directly through the site is actuallyquite high. According to the Eurobarometer survey, nearly 38% ofEuropean enterprises with a website offer this feature. This represents aconsiderably higher figure than the one reached by the CSC study. Anumber of factors may explain the greater optimism expressed by theEurobarometer study. First, it included a larger sample spread over a greaternumber of countries, as well as a broader range of companies (in terms ofsize) than the CSC study. Second, the Eurobarometer survey askedparticipants a general question about whether their company offeredcustomers the possibility to order through the company’s website. It did notspecify how or by what means the order process took place, so there may besome definitional differences between CSC’s understanding of transactioncapabilities and Eurobarometer’s vision of the order process, such as e-mailordering, hence the differing results.

2000 2001

Transact14.1%

Interact26.4%

Inform56.4%

Do nothave awebsite0.0%Deliver

3.2%

European Companies' Website Operating Capabilities,2000 & 2001 (as a % of respondents)

Source: Computer Sciences Corporation (CSC), 2001


Transact14.1%

Interact15.1%

Inform60.6%

Do nothave awebsite0.4%Deliver

9.9%


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In Germany, the ratio has climbed close to 50%, although the proportion isunder 30% in France and Italy, and surprisingly, in more advanced internetmarkets such as Belgium and the Netherlands as well. Remarkably, there islittle difference in website sales capabilities according to business size,suggesting that either small and medium-sized enterprises (SMEs) inEurope are well advanced in their adoption of e-business applications orlarge firms have been sufficiently slow in their uptake of the technology toallow SMEs to catch up.

European Company Websites Allowing Direct Sales toCustomers, by Country, 2001 (as a % of companieswith a website)

Yes No DK/NA

Germany 47.9% 50.7% 1.4%

Austria 44.8% 55.2% 0.0%

Ireland 39.7% 58.6% 1.7%

Greece 38.8% 60.3% 0.9%

Total EU-15 37.9% 61.0% 1.1%

Sweden 37.7% 62.0% 0.3%

Portugal 37.3% 62.4% 0.3%

Finland 36.5% 63.2% 0.3%

UK 36.5% 61.5% 2.1%

Denmark 35.8% 62.9% 1.3%

Luxembourg 32.6% 66.0% 1.4%

Spain 31.8% 67.5% 0.7%

Italy 29.5% 69.7% 0.9%

Netherlands 26.8% 72.9% 0.4%

France 25.7% 73.8% 0.5%

Belgium 23.5% 75.5% 1.0%

Note: Figures may not add up to 100% due to roundingSource: Flash Eurobarometer #116, December 2001



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European Company Websites Allowing Direct Sales toCustomers, by Business Size and Sector, 2001 (as a %of companies with a website)Business sizeSME (10-49)

38.4%

60.4%

1.2%

SME (50-249)

34.1%

65.0%

0.9%

Major (250+)

41.0%

58.3%

0.6%

SectorManufacturing

33.9%

65.1%

1.0%

Construction

37.8%

56.8%

5.4%

Distribution

40.3%

59.5%

0.2%

Services

41.5%

58.2%

0.3%

Yes No DK/NA




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By comparison, CSC’s regional comparison of large enterprises’ e-commercecapabilities has found that just one fifth of businesses worldwide areconnected with their suppliers through the internet. In this category,European companies have taken the lead.

Even fewer companies had the ability to sell their goods or services viatheir own websites, with an average 15% of respondents indicating thatthey were able to do so. It is interesting to note that while North Americancompanies were more likely to have website transaction capabilities thantheir European counterparts, a significant proportion of European firmswere apparently finding other ways to connect with their trading partnersthrough the internet. More than in any other region in the world, Europeancompanies view the internet as a valuable tool for reaching new customersand suppliers. CSC has found that 55.6% of European respondents to itssurvey believe that the internet has increased the number of suppliers thattheir company uses, compared to a global average of 30.4% of respondents.

In a separate survey looking at the e-commerce activities of Europeanbusinesses, IDC found that 38% of European procurement managers wereusing the internet to buy and sell goods or services in 2001, while anadditional 36% of respondents said that they planned to go online in 2002.Just 9% of procurement managers said that they had no intention of usingthe internet at all. According to IDC, the majority of procurement activityhas taken place in the maintenance, repair, operation (MRO) supplies sector.

Percent of Large Companies' Suppliers Linked via theInternet, by Region, 2001

North America 20.3%

Europe 29.0%

Asia-Pacific 17.3%

Global average 21.8%



Percent of Large Companies' Websites withTransaction Capabilities, by Region, 2001

North America 17.1%

Europe 14.1%

Asia-Pacific 13.3%





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In other words, like companies elsewhere in the world, Europeanenterprises have begun their online buying with products used in day-to-day operations (such as paper and office supplies), but on the whole, theyhave not graduated to materials used to manufacture goods. Of the morethan 500 procurements managers (in companies with 100 or moreemployees) surveyed, more than 50% of respondents said they had used theinternet to purchase MRO supplies, while approximately one-quarter hadpurchases goods used directly in the manufacturing process.

Nevertheless, as data from the Eurobarometer study show, online buyingand selling still accounts for a very small portion of European companies’total purchases and sales (around 1% in the majority of cases). However,the trend appears to be that as companies increase their online sales, theyalso tend to grow their use of the internet for procurement purposes as well.On a by-country basis, Southern European countries, particularly Portugal,are doing the least procurement and selling on the internet.

According to the Eurobarometer data, companies in the service sector arethe most advanced in using the internet to buy and sell, with those inmanufacturing lagging behind. It is interesting to note that the IDC survey,which dates to June 2001 (approximately five months earlier than theEurobarometer study, which also surveyed a much larger universe of ITmanagers), found that the manufacturing sector was farthest along indoing procurement online. Other leading sectors, according to IDC, werefinance and public administration, with retail/wholesale lagging behinddue to its continued use of long-established EDI networks.


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Note that the charts below are sorted by the countries, businesses andsectors that most use the internet for procurement and sales. For example,the countries that appear at the top of the first chart (Germany, the UK andDenmark) are the ones that attribute the highest proportion of theirpurchases to the online channel.

Percent of Supplies Purchased Online by EuropeanCompanies, by Country, Business Size and Sector,2001 (as a % of companies connected to the internet)

None 1% 2-4% 5% 6-19% 20%+ DK/NA

Germany 53.1% 7.0% 7.3% 10.4% 10.6% 9.2% 2.4%

UK 53.6% 10.2% 3.3% 3.9% 3.7% 2.0% 23.3%

Denmark 57.2% 10.7% 8.2% 6.3% 8.4% 6.4% 2.8%

Ireland 59.6% 11.4% 5.2% 7.6% 5.9% 8.2% 2.1%

Austria 62.4% 6.5% 3.6% 6.3% 7.4% 8.3% 5.4%

Netherlands 62.4% 11.8% 6.4% 6.3% 6.1% 5.5% 1.5%

Finland 62.8% 13.0% 7.7% 5.3% 3.8% 5.9% 1.6%

Sweden 70.0% 6.1% 4.1% 6.1% 5.5% 3.1% 5.3%

Belgium 70.2% 7.4% 5.9% 6.4% 5.3% 4.0% 0.8%

Luxembourg 70.4% 7.7% 5.6% 4.9% 5.0% 3.9% 2.6%

Greece 77.1% 4.8% 3.6% 0.8% 1.6% 2.0% 10.0%

Spain 78.2% 11.8% 2.5% 2.3% 2.5% 1.2% 1.3%

France 82.8% 5.6% 2.1% 2.3% 2.2% 3.0% 2.0%

Italy 83.9% 4.4% 2.5% 3.6% 2.2% 2.8% 0.6%

Portugal 89.0% 3.1% 0.7% 0.2% 0.8% 2.1% 4.1%

Business size

Major (250+) 47.8% 11.3% 7.7% 8.7% 4.6% 3.1% 16.9%

SME (50-249) 63.8% 8.7% 4.5% 6.5% 4.6% 4.2% 7.7%

SME (10-49) 67.9% 7.3% 4.4% 5.5% 5.8% 5.2% 3.9%

Sector

Services 56.1% 7.5% 5.4% 8.3% 9.2% 7.9% 5.6%

Construction 67.1% 8.6% 6.1% 5.9% 5.0% 3.8% 3.6%

Distribution 68.0% 6.4% 4.9% 4.6% 5.4% 5.0% 5.8%

Manufacturing 71.2% 8.3% 3.2% 5.4% 4.1% 3.8% 4.1%

Total EU-15 66.7% 7.6% 4.5% 5.8% 5.6% 5.0% 4.8%




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Percent of Total Sales Made Online by EuropeanCompanies, by Country, Business Size and Sector,2001 (as a % of companies connected to the internet)

None 1% 2-4% 5% 6-19% 20%+ DK/NA

UK 57.3% 15.9% 5.7% 5.8% 5.1% 3.3% 7.0%

Germany 60.7% 7.7% 6.5% 8.4% 6.9% 3.8% 6.1%

Austria 68.8% 7.0% 2.6% 4.4% 2.8% 5.1% 9.3%

Ireland 70.5% 10.4% 3.9% 4.3% 3.3% 5.7% 2.0%

Netherlands 74.1% 9.8% 5.1% 3.8% 1.7% 2.6% 3.0%

Sweden 76.2% 6.3% 4.8% 4.7% 2.1% 2.4% 3.5%

Denmark 76.4% 6.9% 5.0% 4.6% 3.1% 1.0% 2.9%

Finland 78.8% 9.8% 4.6% 0.7% 2.7% 2.5% 1.0%

Luxembourg 78.8% 6.1% 3.9% 4.3% 3.3% 5.7% 2.0%

Belgium 83.8% 5.1% 1.9% 3.3% 3.2% 1.9% 0.8%

Greece 84.2% 2.3% 0.5% 1.1% 0.9% 0.5% 10.6%

France 87.2% 5.0% 3.2% 1.5% 1.0% 0.7% 1.5%

Italy 89.0% 4.2% 2.2% 1.7% 2.0% 0.6% 0.3%

Spain 89.6% 4.9% 1.1% 0.8% 1.0% 0.5% 2.1%

Portugal 92.1% 0.5% 0.8% 0.8% 0.3% 0.2% 5.3%

Business size

Major (250+) 61.2% 11.3% 7.9% 4.1% 3.2% 2.0% 10.3%

SME (50-249) 73.5% 6.1% 5.7% 4.6% 2.7% 2.3% 5.1%

SME (10-49) 74.4% 7.4% 3.8% 4.5% 3.9% 2.3% 3.7%

Sector

Services 65.3% 7.7% 4.8% 5.8% 5.6% 4.6% 6.2%

Distribution 71.0% 9.3% 5.0% 5.5% 3.4% 2.2% 3.6%

Construction 77.8% 6.1% 4.7% 2.0% 3.5% 1.7% 4.2%

Manufacturing 79.5% 6.0% 3.0% 3.8% 3.2% 1.3% 3.2%

Total EU-15 73.9% 7.4% 4.2% 4.5% 3.7% 2.3% 4.1%




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As with most other regions, internal resistance within Europeancorporations has been the greatest barrier to e-business adoption.According to the IDC study, 27% of respondents cited such difficulties astheir leading challenge. The Net Impact Study, which looked at businessesin the UK, France and Germany, found organizational inertia to be lower onthe list of barriers, well behind cost and time issues.

Barriers to the Use of Internet Business Solutions inthe UK, France and Germany , 2001 (as a % ofrespondents)

Dollar cost of project 10%

Worker training 8%

Cost of new infrastructure 7%

Time to implement projects 6%

Organizational inertia 5%




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C. Use of E-Business Software and Services

Enterprise Resource Planning (ERP) and E-LogisticsForrester Research predicts that the future of the logistics market in Europeis online. The research firm believes that by 2005, the European onlinelogistics market will generate EUR 133 billion in revenue. The companysays that freight exchanges will die out and be replaced by e-marketplaces,private hubs and logistics hubs. In 2005, logistics transactions for roadtransportation will represent 50% of the e-market (EUR 69 billion),transportation services will account for 20% (EUR 35 billion) and airfreightwill account for a much smaller 3% of the online logistics market.

Western European Enterprise Resource Planning(ERP) Applications Services Market, 2001 & 2005 (inbillions)

2001 $15

2005 $24

Source: International Data Corporation (IDC), July 2001



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Western European Enterprise Resource ManagementApplication Revenues, by Country, 2000 (in millions)

Germany

$23.5

UK

$22.6

France

$14.0

Netherlands

$7.6

Italy

$5.4

Switzerland

$4.5

Sweden

$4.2

Spain

$4.0

Belgium/Luxembourg

$3.4

Denmark

$2.9

Austria

$2.4

Norway

$2.3

Finland

$1.6

Portugal

$1.0

Ireland

$0.5

Greece

$0.2




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Customer Relationship Management (CRM)Datamonitor predicts that spending on outsourced customer relationshipmanagement (CRM) in Europe will grow from $5.1 billion in 2001 to $10.5billion in 2005. Datamonitor reports that the UK, Germany and France,Europe’s three largest economies, dominate the market, generating 45%,20% and 14% of total outsourced CRM revenues, respectively.

This growth in CRM use comes on the heels of several early 2001 IDCstudies that found European companies to be generally uninterested in orunfamiliar with CRM applications. As organizations see the benefits ofdeploying CRM solutions, particularly in a down economy, revenues andadoption rates should rise accordingly.

Application Service Providers (ASPs)Although the concept of delivering software applications as rented servicesremains viable, changes are afoot in the application service provider (ASP)market. UK-based research firm Ovum has detected the following majorshifts between what it calls the first and second ASP waves:

■ Vendors will offer software only as a service, rather than sellingsoftware licenses or CD products, thereby eliminating complicationsassociated with installation and maintenance.

■ Services will be largely standardized, with potential for configurationbut not customization.

■ The market will see the development of applications linkinginformation and communication technology, including facilities suchas call centers and services such as unified messaging.

Ovum believes that considerable revenue potential exists for the followingtypes of network operators, with provision of retail ASP services the area ofgreatest opportunity across the board:

■ Telecommunications operators (incumbent telcos, competitive carriersand mobile operators)

■ Backbone ISPs and IP telephony operators■ Hosting service providers and IT service firms


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A report by Infonetics Research has determined that European companiesare more disposed to purchase network services and outsource applicationsthan those in the US. This tendency augurs well for the application hostingmarket, which Infonetics predicts will grow from $678 million in 2001 to

$3.8 billion in 2005−an increase of 460%.The Infonetics study, based on interviews with 300 companies in France,Germany, Scandinavia and the UK, found security to be both a driver forand a barrier to moving to application hosting services. In addition, as thechart below reveals, many European firms clearly felt that they would not

get an adequate return on their investments.

Application Hosting Expenditures in Europe, 2001 &2005 (in millions)

2001 $678

2005 $3,800

Source: Infonetics Research, 2002


Barriers to Deploying Application Hosting Services inEurope, 2001

Lack of security 57%

Lack of performance 48%

Lack of control 45%

Reduced reliability/availability/uptime 44%

Difficulty migrating existing applications 39%

Increased cost 39%

Service provider viability 34%

Difficulty managing/deploying 29%

Source: Infonetics Research, 2002



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According to the Yankee Group, businesses choose hosting services basedon the level of support and service they provide as well as their prospectsfor survival in what has become (after last year’s wave of consolidation) ahighly competitive marketplace. Consequently, price is a secondaryconsideration. Dedicated hosting will be the largest market over the nextfive years, followed by shared hosting, with collocation a distant third.

IDC reports that the application service provider (ASP) market in WesternEurope will experience a compound annual growth rate of 128% between2000 and 2005. The company predicts that spending on the ASP market inthe region will reach $5.7 billion in 2005−up from $93 million in 2000. In aview somewhat contradictory to the conclusions reached by Infonetics, IDCnotes that Western Europe has been slower to adopt xSPs (“all” serviceproviders) than the US; activity has been limited to network serviceproviders such as France Télécom and UUNET.

Web Hosting Services Revenues in Western Europe,2001 & 2006 (in billions)

2001 $1.41

2006 $8.27

Source: Yankee Group, December 2001


Application Service Provider Revenues in WesternEurope, 2000 & 2005 (in billions)

2000 $0.093

2005 $5.7

Source: International Data Corp. (IDC), 2001



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As the following figures from IDC’s June 2001 “Worldwide Enterprise ASPForecast and Analysis, 2000-2005” report demonstrate, spending on ASPservices remains highest in the US, with Western Europe a distant second.Europe will begin to close the gap by 2005, but spending will nonethelessbe just over 1/3 of the US total.

The NOP Research Group screened 12,000 commercial establishments andconducted 700 follow-up telephone interviews with internet-connectedbusinesses in the UK between November 2001 and January 2002. Notsurprisingly, the survey revealed that usage of ASPs is greatest amonglarger businesses. TNS-IT, meanwhile, found that companies in France andthe UK were most likely to turn to outsourcers for network connections, sitedesign services and system operations.

Global Spending on ASP Services, by Region,2000-2005 (in millions)Region 2000 2001 2002 2003 2004 2005

US $770.5 $1,545.0 $3,012.0 $5,764 $9,802.0 $15,011.0

Canada $19.5 $46.3 $97.3 $181.9 $305.4 $485.5

WesternEurope

$93.3 $293.0 $804.4 $1,790.8 $3,405.2 $5,792.1

Asia-Pacific(includingJapan)

$93.9 $249.9 $464.9 $780.7 $1,309.9 $2,163.5

Rest ofworld

$9.0 $33.0 $85.0 $156.0 $245.0 $439.0

Worldwide $986.1 $2,167.3 $4,463.6 $8,673.3 $15,067.5 $23,891.1

Source: International Data Corporation (IDC), June 2001


Use of ASPs in the UK, by Business Size, 2002 (as a %of respondents)

<10 employees 5%

10-49 employees 5%

50-199 employees 5%

200-499 employees 12%

500+ employees 18%

Note: Survey was conducted between November 2001 and January 2002Source: NOP Research Group Ltd, April 2002



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Use of Outside Resources by Companies in Franceand the UK, 2001 (as a % of respondnets)

Network connections

65%

58%

Site design

55%

61%

Network/system operations

62%

44%

Creation of in-house software for operational aspects ofbusiness

14%

49%

Providing software as ASP for operational aspects of business

3%

31%

Providing software as ASP for revenue-generating activities

2%

10%

France UK




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Among ASP suppliers, Frost & Sullivan found Oracle and IBM to have the greatest name recognition for European companies. Microsoft was adistant third.

European Awareness of Different ASP Suppliers, 2001

Oracle

13.7%

IBM Global Services

12.5%

Microsoft

5.5%

BT Ignite

4.1%

Telecomputing

4.1%

Compaq

2.7%

EDS

2.7%

Ision

2.7%

Dell

2.7%

Saga

2.7%

Others

46.6%

Source: Frost & Sullivan, 2001



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However, the TNS-IT study concluded that, among businesses in Franceand the UK, the name of the outsourcer was secondary in importance to itsability to complete the contracted services on time. Cost and creativity wereother important factors.

Characteristics Sought in Providers of OutsideResources by Companies in France and the UK, 2001(as a % of respondents)

Offers cost-effective solutions

34%

81%

Completes solutions on schedule

62%

55%

Offers creative solutions

46%

50%

Understands customers’ needs

44%

37%

Can use knowledge of internet to develop customized solutions

41%

34%

Well-known/good reputation

28%

44%

Understands how to help shift client business towardinternet-based models

25%

19%

Close to company location

30%

12%

France UK




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D. Participation in Online ExchangesDuring the course of 2001, the Giga Information Group and Booz AllenHamilton conducted a study of business-to-business exchanges in whichthey identified 2,233 internet-based marketplaces worldwide. Althoughseveral exchanges were closed down while the survey was in progress orshortly after it was completed, the researchers were able to gather enoughinformation to profile 1,802 internet-based exchanges.

Broken down by geography, North America was served by the largestproportion of exchanges, accounting for 38% of the total. Europe had thesecond highest percentage of regional marketplaces, while 20% of theprofiled exchanges claimed to be serving a global membership. The studyidentified 485 online exchanges (out of a total of 1,802) that had a userbase primarily within the European market, while North America was hometo 684 exchanges.

A substantial 92% of the surveyed marketplaces were developed byindependent owners, while consortia-backed exchanges accounted for just5% of the total. The remaining 3% were determined to be private exchanges.

The study went on to find that the number of exchanges variedsignificantly by industry, with the transportation and logistics industry, forexample, being home to 106 marketplaces, while the automotive industry hadjust 17. Other industries with more than 100 exchanges included health care,food and beverage, electronics, and industrial goods. The telecommunicationsand hospitalities industries had fewer than 25 marketplaces.

Booz Allen Hamilton and the Giga Information Group also counted 170generalist exchanges, which attempted to provide online trading services tomultiple industries. Many used online catalogs to sell indirect procurementgoods, or operated auction services for the disposal of excess inventory items.

Latin America5%Asia-Pacific

& Japan10%

Global20%

Europe27%

North America38%

Breakdown of Public Exchanges, by PrimaryGeographic Region Served, 2001

Source: Booz Allen Hamilton, Giga Information Group, 2001



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As might be expected, independent trading exchanges tended to provide anarrower range of core services, compared to those of industry-backedexchanges. Independent exchanges were often developed with less than$20 million in venture funding, while consortia-led exchanges such asTransora were initiated with more than $200 million in investment support.

Compared to companies in other world regions, businesses in Europe are themost enthusiastic about internet-based trading exchanges. A significant22.3% of IT professionals polled in the CSC survey said that their companywas in the midst of implementing some kind of exchange technology, versusjust 6.7% of businesses in North America and 12.6% worldwide.

Private tradingexchanges3%

Consortia-ledexchanges

5%

Independent trading exchanges92%

Breakdown of B2B Exchange Ownership, 2001

Source: Booz Allen Hamilton, Giga Information Group, 2001


Percent of Leading Global Companies Participating inOnline Exchanges, by Region, 2001

North America 32.4%

Europe 41.7%

Asia-Pacific 21.2%





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The December 2001 Eurobarometer study found that approximately 13% ofEuropean firms are selling their products and services through onlinemarketplaces or exchanges. This number is significantly lower than the41.7% participation figure that emerged from the CSC study (see chartabove). However, participation implies both selling and/or buying throughonline exchanges and, of the two, buying is far easier to implement. Inaddition, the Eurobarometer survey sample is weighted towards SMEs,particularly those with 10-49 employees, which are less likely to have thecapacity (technological and/or financial) to participate in marketplacebuying and selling. Taken together, the portion of large companies buyingand selling through online exchanges is roughly equivalent to the figurethat the CSC survey reached.

No plansto participate

13.7%

Implementing22.3%

Investigating22.3%

Participating41.7%

Participation in Online Exchanges among LargeEuropean Companies, 2001



European Companies Buying and SellingProducts/Services through Online Marketplaces, 2001(as a % of companies connected to the internet)

Austria

22.6%

16.2%

Germany

22.4%

18.0%

Finland

21.4%

17.6%

Ireland

21.1%

15.8%



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UK

20.1%

20.0%

Total EU-15

15.8%

12.8%

Denmark

14.6%

12.0%

Sweden

13.8%

16.3%

Greece

13.4%

6.9%

Luxembourg

12.6%

15.8%

Belgium

12.5%

7.3%

Italy

12.5%

8.1%

France

8.0%

6.8%

Spain

7.9%

3.4%

Netherlands

7.7%

12.7%

Portugal

4.9%

3.9%

Buying Selling

Note: Remaining responses for buying and selling were either "No" or"DK/NA." With these figures included, the totals in both categories add upto 100%Source: Flash Eurobarometer #116, December 2001



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European Companies Buying and SellingProducts/Services through Online Marketplaces, byBusiness Size and Sector, 2001 (as a % of companiesconnected to the internet)Business sizeSME (10-49)

15.2%

12.0%

SME (50-249)

16.2%

15.3%

Major (250+)

28.8%

22.5%

SectorServices

21.4%

17.6%

Distribution

16.1%

16.4%

Manufacturing

12.1%

9.5%

Construction

16.4%

6.6%

Buying Selling

Note: Remaining responses for buying and selling were either "No" or"DK/NA." With these figures included, the totals in both categories add upto 100%Source: Flash Eurobarometer #116, December 2001



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These figures are considerably higher than those reached by a preliminaryEurostat survey carried out in the first half of 2001 (data for Denmark,however, date to the end of 2000) in 13 of the EU member states. As withthe Eurobarometer study, the Eurostat survey examined enterprises with 10or more employees (although it divided the sample into SMEs, those with10-249 employees, and Large, those with 250+ employees). In all thesectors surveyed, use of the internet for both purchasing and sales was inthe single digits.

Examples of online exchanges that are based in Europe include theshipping industry’s Balticexchange, Goodex, PEFA.com, andCPGMarket.com. Leading consortia-backed exchanges such as Covisint andGlobalNetXchange have also reported significant transaction activitythrough their European operations, while global chemicals industryexchange ChemConnect has sales offices in Frankfurt, Rotterdam, Milan,Paris and London.

According to the latest study by Forrester Research, Europe’s leading 25business-to-business exchanges generated just EUR 350 million in revenueduring 2001, with 88% of those exchanges reporting that they wereunprofitable in early 2002. By the end of this year, however, 36% of theseexchanges expect to be profitable.

European Enterprises Using Specialized B2BMarketplaces for Procurement and Sales, 2001

Business services

7.7%

1.9%

Transport and communication

6.1%

2.2%

Distribution

5.5%

1.9%

Manufacturing

2.7%

1.2%

Hotels and restaurants

2.3%

3.1%

Procurement Sales

Note: Country coverage limited to Austria, Denmark, Greece, Italy,Luxembourg, Portugal, Sweden and the UKSource: European Commission, April 2002



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Leading European ExchangesAs of late March 2002, eMarketer has compiled the reported membershipand transaction activity of three leading European exchanges, finding thatexchange-based trade does indeed have a pulse in Europe, although thefuture for most exchanges remains uncertain.

Data from consumer packaged goods industry exchange CPGmarket.comshows that after one and a half years of operations, the Geneva-basedmarketplace has been able to sign up 2,500 suppliers and 600 buyers,driving more than EUR 1 billion in transactions through its network. Themajority of these transactions have been reverse auction events, althoughthe company has rolled out supply chain management and analyticalsolutions as well.

Similarly, in December 2001, internet auction operator Goodex reportedthat it had processed EUR 1.2 billion in online reverse auctions since itsfounding in March of 2000. Based in Hamburg, Goodex providestechnology and consulting services to large enterprises in Europe, theUnited States and Asia.

By comparison, US-based Freemarkets claims to have facilitated EUR 5.2billion in online auctions in Europe during 2001, accounting forapproximately 15% of Freemarkets’ EUR 34.5 billion in global transactionactivity during 2001.

Exchange Profile: CPGmarket.com Membership andTransaction Activity, March 2002Number of suppliers 2,500

Number of buyers 600

Number of e-sourcing events* 1,000+

Value of transactions* EUR 1 billion+

Note: *Since beginning of operations in October 2000Source: CPGmarket.com, March 2002


Exchange Profile: Goodex Transaction Activity, as ofDecember 2001Total value of online reverse auctions* EUR 1.2 billion

Average value per auction EUR 1.3 million

Average price reduction 19%

Note: *Since beginning of operations in March 2000Source: Goodex, December 2001



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Finally, France-based HUBWOO.com counts 490 suppliers and 44 majorbuyer-sites as users of its network, which processed 12,100 transactionsduring 2001. As of this March, the number of suppliers connecting to itsnetwork had jumped to 713. HUBWOO builds and hosts e-commercenetworks that facilitate the sale of maintenance, repair and operating(MRO) supplies.

Another example of an e-business leader is Techint, a conglomerate withroots in both Argentina and Italy that has developed an exchange calledExiros. Techint, as well as several of its trading partners, use Exiros, andtraded in excess of $1.6 billion in goods and services during 2001. Most ofthese revenues came from Latin America (Venezuela, Argentina andMexico). However, Italian firms traded nearly $225 million. The exchangefeatures a broad portfolio of items that have been traded through itsnetwork, ranging from chemicals and industrial supplies to logistical andbusiness services.

However, despite the impressive numbers behind these exchanges, the roadahead for these and other public exchanges in Europe appears to bedifficult. Just as several of their US counterparts have decided to build theirown private exchanges, many European companies are now leaningtoward the same conclusion.

Exchange Profile: HUBWOO Membership andTransaction Activity, 2001Number of transactions 12,100

Number of deployed sites (buyers) 44

Number of connected users (buyers) 2,400

Number of connected suppliers 490

Source: HUBWOO, 14 February 2002


Exchange Profile: Value of Online Auctions Conductedvia Exiros, by Country, 2002 (in millions)

Venezuela $657.86

Argentina $560.94

Italy $223.65

Mexico $191.91

Source: Exiros, 2002



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According to data from Forrester Research, among the 30 large Europeanenterprises that it surveyed in early 2002, only 6% of respondents turned topublic exchanges for more than 5% of their companies’ direct materialspurchasing. The vast majority of businesses, at 80% of respondents, soldless than 1% of their companies’ goods through a public exchange. On theother hand, it is still early in the game, as growth for many business-to-business exchanges is set to really pick up during 2002.

IDC believes that European companies will increasingly opt for privatemarketplaces due to the complexities associated with successfulimplementation of public exchanges. Cost, security, time to market, andcollaboration with trading partners are among the issues cited by IDC. Inthe ongoing evolution of private exchanges, the focus is now shifting to e-procurement applications and other services. According to IDC, the marketfor exchange applications in Western European will increase from justunder $1 billion in 2001 to nearly $3 billion by 2005.

Indeed, one bright spot among public exchanges in Europe appears to bethe consortia-backed exchanges that have global operations. eMarketer hasfound that exchanges such as Exostar, Covisint, and GlobalNetXchangehave had success as they take the slow but steady approach to building outtheir networks in Europe. Covisint attributed roughly 20% of its transactionactivity to its European operations in 2001. By comparison, 70% to 75% ofCovisint’s transaction activity was based in the Americas during 2001, asOEMs used the exchange to connect with suppliers throughout North andSouth America.

E-Marketplace Application Revenues in WesternEurope, 2001 & 2005 (in billions)

2001 $0.8

2005 $2.8

Source: International Data Corporation (IDC), December 2001


VII

Methodology 7

I Introduction 11







A. Market Growth Factors 154

B. Revenue Forecasts 155

C. 2001 Holiday Shopping 166

D. Online Buyers 169

E. Category Review 183


Index of Charts 197


153



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A. Market Growth FactorsAs in the US, European e-commerce continues to grow as a result of severalimportant trends:

■ Continued growth in the internet user population, which contributes tothe expansion in the number of potential internet buyers

■ Consumers now have several years of experience with e-commerce,encouraging veteran internet users who are comfortable navigating theinternet to shop and purchase online

■ Consolidation in the dot-com sector, resulting in a smaller number ofdominant retailers and portals, limiting competition but enablinghigher quality sites, more effective marketing, and increasingly bettercustomer service

■ Easier cross-border trading, which is likely to facilitate e-commercepurchases for consumers, particularly those in the Euro-zone

Moreover, in contrast to the US government, the European Commission hastaken a more active approach at promoting regulations that protect consumersfrom poor service and fraud. Pending draft regulations would remove nationalbarriers to e-commerce across the EU, requiring the following:

■ Transparency for web advertising ■ Protections for contracting online ■ Limitations on the liability of internet intermediaries■ Requirements to disclose codes of conduct, such as those for online

dispute settlement■ Minimum requirements for consumer information

The adoption of such regulations will increase trust in the online consumermarketplace, which has historically been a barrier to online buying in Europe.


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B. Revenue ForecastsDespite expectations of slow GDP growth in Europe in the coming year,eMarketer anticipates continued expansion of B2C e-commerce revenues.As the following chart illustrates, B2C e-commerce will reach $37.07 billionby the end of 2002, and will grow to $182.3 billion by 2004. eMarketer’sforecast assumes that the continued diffusion of broadband, interactive TV(iTV) and mobile internet applications will lead to an evolution in Europeanconsumer habits and concomitant growth in B2C spending. eMarketer’s e-commerce estimate is derived from comparative estimates of onlinerevenue aggregated from numerous private market research and investmentfirms as well as a global model of e-commerce growth.

eMarketer anticipates that total retail e-commerce sales for 2002 will be more than double the level of sales in 2001. (Still, however, 2002 B2C e-commerce revenues in Europe of $37 billion are only half as large as2002 US B2C revenues of $75 billion.) Projecting to 2004, eMarketerexpects that the compound annual growth rate (CAGR) for B2C e-commerce revenues will be 118%. By comparison, the CAGR for retail e-commerce in the US over the same period will be approximately 31%.

A large percentage of the online retail market consists of travel-relatedpurchases. However, unlike the US, where online travel representsapproximately one-third of total B2C e-commerce revenues, Europeanonline travel purchases currently account for only 12% of total B2C e-commerce revenues, according to data from Pro Active International. Inpart, the smaller proportion of European e-commerce travel expendituresreflects the greater popularity of packaged tours sold through agencies inEurope, the widespread use of lower-cost rail, and the popularity amongEuropeans of non-travel retail categories like groceries and apparel.

Applying this percentage to eMarketer’s total European B2C e-commercerevenue figure for 2002, eMarketer estimates that European consumers willspend $4.4 billion on travel by the end of 2002.

B2C E-Commerce Revenues in Europe, 2000-2004 (inbillions)

2000 $8.06

2001 $16.48

2002 $37.07

2003 $81.83

2004 $182.54




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In contrast to the US market, where retail sales of consumer items areexpected to grow steadily as a percentage of total B2C revenues, eMarketerexpects the opposite to occur in Europe, particularly as online travelpurchases gain in popularity and approach the proportion of online salesfound in the US. In 2002, consumers will spend $32.7 billion on goods likebooks, CDs and clothing. Moreover, some categories that have beenwoefully unsuccessful in the US have gained a solid foothold in countrieslike the UK.

Despite the growth in B2C e-commerce, the retail sector still representedless than a quarter of Europe’s total e-commerce revenues in 2001. B2Bpurchases tend to be for more expensive items that are bought by firms onan ongoing, frequent basis. By 2004, B2C will amount to less than one-fifthof all e-commerce because of a quicker pace of growth and larger base ofexpenditures in the B2B sector.

Consumer goods$32.7

Travel$4.4

Travel and Consumer Goods Purchased Online inEurope, 2002 (in billions)

Source: eMarketer, April 2002


2001 2004

B2B 76%

B2C 24%

B2C 19%

B2B 81%


B2B and B2C E-Commerce in Europe, 2001 & 2004

www.eMarketer.com033343 ©2001 eMarketer, Inc.


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Comparative Estimates

Regional ForecastseMarketer’s projected rate of B2C e-commerce growth is somewhat more rosythan Forrester Research’s latest projections for Europe’s online retail sector,as the following chart illustrates. Forrester projects that internet consumerswill purchase 57% more online in 2003 than in 2002, as they begin to extendtheir purchases to more retail categories and bigger-ticket items.

However, eMarketer’s estimates are considerably more conservative thanprojections by GartnerG2. The research firm recently estimated thatEuropean online shopping revenues would reach EUR 97.8 billion(approximately $85 billion) in 2002, amounting to 2.3% of all retail sales.

Considering that figures from the US Commerce Department show that B2Ce-commerce accounts for only about 1% of total US retail purchases, theGartnerG2 figure likely overestimates the share of the market captured bye-commerce in Europe.

B2C E-Commerce Spending in Europe, 2002-2006 (inbillions of €)

2002 €32.8

2003 €51.5

2004 €77.8

2005 €109.8

2006 €147.6

Source: Forrester Research, 2002


B2C E-Commerce Sales in Europe, 2001, 2002 & 2005(in billions)

2001 $57.6

2002 $85.0

2005 $225.0

Source: GartnerG2, March 2002


Online Retail Sales in Europe, 2002 & 2005 (as a % oftotal retail sales)

2002 2.3%

2005 5.6%

Source: GartnerG2, 2002



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In contrast, a 2001 estimate by the Yankee Group–that consumers inWestern Europe will spend $20 billion online in Western Europe in 2002–islikely to underestimate the true potential of the B2C sector. (Yankee’sestimates for US e-commerce are also among the most conservative.)

B2C E-Commerce Revenues in Western Europe,2000-2006 (in billions)

2000 $8.1

2001 $12.4

2002 $20.1

2003 $30.3

2004 $49.4

2005 $73.0

2006 $92.1

Source: Yankee Group, 2001



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The following chart presents eMarketer’s forecast together with theforecasts of several market research firms.

Comparative Estimates: B2C E-Commerce Revenues inEurope, 2000-2006 (in billions)

BostonConsultingGroup, 2001

Datamonitor,July 2001

eMarketer,2000

EuropeanInformationTechnologyObservatory(EITO)*,February2002

ForresterResearch

Gartner G2,March 2002

InternationalData Corpo-ration (IDC)*,September2001

Pro Active, July2001

Yankee Group*,March 2001

2000

$8.90

–

$8.06

–

–

–

$12.54

$18.70

$8.14

2001

–

$16.40

$16.48

$20.00

–

$57.60

$24.57

$24.90

$12.42

2002

–

–

$37.07

–

$29.10

$85.00

$46.33

–

$20.10

2003

–

–

$81.83

–

–

–

$79.68

–

$30.30

2004

–

–

$182.54

–

–

–

$167.92

–

$49.45

2005

–

–

–

$207.78

–

$225.00

$253.20

–

$73.02

2006

–

–

–

–

$135.00

–

–

–

$92.06

Note: *Western Europe onlySource: eMarketer, 2002; various, as noted, 2000-2002



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Country ForecastsGermany, the UK, France and Italy are the four countries that ring up thelargest percentage of e-commerce revenues in Western Europe, as thefollowing chart illustrates. Note that although the data below compriseboth B2B and B2C e-commerce revenues, these four countries alsodominate the B2C marketplace.

28%

Distribution of E-Commerce in Western Europe, byCountry, 2001

Germany

21%

11%

10%

UK

France

Italy

Belgium 2%

3%

4%

4%

4%Netherlands

Spain

4%

Switzerland

Denmark

2%Austria

Finland 2%

2%Norway

Greece 1%

Ireland 1%

Portugal 1%

Source: International Data Corporation (IDC), February 2002


Sweden


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The following data from GfK Marketing Services suggest that B2C spendingin the UK–at least for Spring 2001–was roughly double that of Germany.Countries like Spain and the Netherlands were far behind in B2C spending.

B2C E-Commerce Spending in Selected WesternEuropean Countries, 2001 (in billions)

United Kingdom

€2.7

€2.1

Germany

€0.8

€1.2

France

€0.4

€0.3

Spain

€0.2

€0.1

Netherlands

€0.1

€0.4

Belgium

€0.0

€0.004

Fall 2001 Spring 2001

Note: Base: population ages 14-69Source: GfK Marketing Services, November 2001



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The retail e-commerce market in Britain should continue to growsubstantially from its current level of approximately $10 billion in 2002. Asin the US, B2C e-commerce sales represent less than 1% of all sales in theUK, according to data from the UK National Statistics Office.

Comparative Estimates: B2C E-Commerce Revenues inthe UK, 2000-2005 (in billions)

2000 2001 2002 2003 2004 2005

eMarketer,November 2001

– $4.40 $10.20 – – –

EuropeanInformationTechnologyObservatory(EITO), February2002

– $5.29 – – – $38.95

ForresterResearch, June2001

$2.81 $5.65 $9.83 $14.43 $19.61 $25.68

GartnerG2, March2002

– – $9.77 – – $47.40

Office forNational Statistics(UK), July 2001

$14.30 – – – – –

Pro ActiveInternational, July2001

$5.95 – – – – –

Source: eMarketer, 2002; various, as noted, 2001 & 2002



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Projections from Forrester, GartnerG2, and EITO show substantial growthin Germany’s B2C market over the next several years. Indeed, asinvestments in the former East Germany continue, the digital divide thathas plagued Germany should begin to narrow, with greater numbers ofGermans gaining internet access and then developing into regular onlineshoppers and buyers.

Comparative Estimates: B2C E-Commerce Revenues inGermany, 2000-2005 (in billions)

2000 2001 2002 2003 2004 2005


– $4.80 $11.00 – – –


– $4.67 – – – $51.99


$2.11 $4.34 $8.21 $14.50 $21.13 $30.07


– – $20.22 – – $65.81




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France has been slow to adopt internet technology. Accordingly, B2C sales willreach a modest $2.1 billion in 2002. If last year is any indication, much of retaile-commerce spending in France will come in the holiday season. In 2001,Jupiter Media Metrix estimated that the November-December shopping seasonaccounted for one-third of B2C e-commerce revenues for the entire year.

Internet diffusion in Italy has not been widespread. As a result, retail e-commerce will not quite reach $1 billion in 2002. This raises questions aboutthe feasibility of achieving the growth rates below forecast by Datamonitorand EITO.

Comparative Estimates: B2C E-Commerce Revenues inFrance, 2000-2006 (in billions)

2000 2001 2002 2003 2004 2005 2006

BenchmarkGroup, April 2002

$0.61 $1.28 $2.10 – – – –


– $1.80 $4.20 – – – –


– $2.20 – – – $32.45 –


$0.55 $1.30 $2.61 $5.36 $7.05 $10.11 $13.72


– – $3.78 – – $22.19 –

Jupiter MMXI,November 2001

$0.65 $1.43 $2.36 $3.46 $4.73 $6.21 $7.96



Comparative Estimates: B2C E-Commerce Revenues inItaly, 2000-2005 (in billions)

2000 2001 2002 2003 2004 2005

Datamonitor,November 2001

$0.56 – – – – $13.05


– $0.40 $0.80 – – –


– $1.64 – – – $24.50


$0.24 $0.58 $1.34 $2.61 $4.52 $7.00




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Eastern EuropeAlthough internet use in Central and Eastern Europe is growing fast, thetechnology remains too expensive for most consumers in this region,according to the Yankee Group. Consumer e-commerce remains paltry,with low incomes, lack of trust in the internet, and lack of access to creditcards and reliable courier services dampening growth. The research firmnoted that most Eastern European countries are adopting regulatoryreforms to help boost e-commerce, and hope that foreign investment andexpertise from abroad, combined with a steady improvement in thetelecommunications infrastructure, will increase the market.


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C. 2001 Holiday ShoppingPrior to the 2001 holiday shopping season, Forrester Research estimatedthat despite the economic downturn, European online retail spending –including travel — for the five weeks leading up to Christmas would growfrom EUR 2.6 billion in 2000 to EUR 4.1 billion in 2001. According toForrester, UK consumers would lead the way by spending EUR 1.4 billion,accounting for nearly 35% of all online holiday spending in Europe.

Interested in comparing holiday shopping in Europe with the spendingthat US consumers rang up in 2001? Read eMarketer’s The US HolidayShopping Report.TM To order copies, visit the eMarketer website athttp://www.emarketer.com or send an e-mail to [email protected].

Measurements made by Jupiter MMXI following the end of the year seemto bear out Forrester’s predictions. According to Jupiter, approximately 33million Europeans used the internet to do Christmas shopping in December2001 alone, spending roughly EUR 2.9 billion on online purchases. Thisfigure represents a 71% increase from December 2000. The shoppingfigures from Jupiter are based on the behavior of panels of approximately50,000 internet shoppers in eight European countries: Denmark, Italy,Germany, Spain, France, the UK, Switzerland and Norway.

“More users are embracing the internet as ashopping channel, and their positive experienceswith the medium will drive repeat business. Thiswill help other online retailers to follow the likesof Amazon and move into profitability.”– Simon Cheshire, NOP World

European Online Retail Spending, Holiday Season2000 & 2001 (in billions of €)

2000 €2.6

2001 €4.1

Source: Forrester Research, 2001


European Online Retail Spending, December 2000 &December 2001 (in billions of €)

December 2000 €1.7

December 2001 €2.9

Source: Jupiter MMXI, 2002




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According to a report by NetValue on the holiday 2001 shopping season,the UK was the leading European market for B2C e-commerce, as measuredby the rate at which visitors to e-commerce sites were converted topurchasers. During the 2001 holiday shopping season, an estimated 10million British internet users visited e-commerce sites, some 3 million morethan in December 2000. Of these 10 million people, nearly 3 million (29%)made a secure connection online. This represents an increase of nearly 1million over the number of purchases made online during the holidays in2000. A secure connection implies that a person’s credit card details wereentered online, suggesting that a purchase was made. By contrast, 58% ofAmerican internet users purchased online during the holiday season 2001,according to research by the Pew Internet and American Life project.

European Retail Spending, by Country, December 2001(in millions)

Spain €104

Sweden €137

Italy €202

France €274

Germany €738

UK €835

Total €2,901

Source: Jupiter MMXI, January 2002


Percent of E-Commerce Site Visitors Who Establisheda Secure Connection in Selected European Countries,December 2001

UK 29.40%

France 17.34%

Germany 24.21%

Spain 18.85%

Italy 6.85%

Denmark 9.54%

Norway 15.55%

Sweden 8.96%

Source: NetValue, 2002



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According to GfK, the retail categories showing the largest sales growth (inrelation to the November-December 2000 period) were consumer electronicsand do-it-yourself. In all, sales showed a 63% year-over-year increase.

E-Commerce Sales Growth in Europe, by Category,November-December 2001 (as a % change fromNovember-December 2000)

216%

204%

131%

126%

100%

98%

78%

64%

64%

55%

48%

45%

35%

32%

26%

-15%

Consumer electronics

DIY

Photographic equipment/camcorders/accessories

Sportswear and equipment/leisure

Large and small electrical appliances

Clothing/footwear

Fast-moving consumer goods

PCs/pre-recorded tapes

CDs/pre-recorded tapes

CD-ROM/video games

Travel/air or rail tickets/overnight accommodation

Jewelry/watches/accessories

Videos/DVDs

Books

Toys/games

Telecommunications equipment/accessories

Total

63%

Source: GfK Web* Scope, February 2002



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D. Online BuyersThe European Commission (EC) collects the most up-to-date and reliablestatistics on the habits and demographics of online consumers in Europe.The EC contracts with EOS Gallup Europe to survey internet users in the EUon their online activities, including propensity to buy online. Based on themost recent survey data collected at the end of 2001, internet marketers canprofile internet buyers in different EU countries.

As the following figures show, only a small percentage of EU internetusers are actually frequent purchasers of goods or services online.Moreover, this percentage changed very little–only one percentagepoint–between June 2001 and November 2001. Only 19% of internet usersconsider themselves either occasional or frequent online buyers.

EU Internet Users Purchasing Products and ServicesOnline for Personal Use, June & November 2001

Frequently

3.5% 3.7%

Occasion-ally

14.6% 15.5%

Rarely

14.9% 15.5%

Neveragain

0.9% 0.9%

Never

65.8% 64.3%

15

45

75

June 2001 November 2001

Source: Flash Eurobarometer #112, January 2002



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Regional data in Europe mask dramatic differences in the behavior ofinternet users from country to country. In the UK, for example, 34.4% ofinternet users reported that they at least occasionally purchase products orservices online. By contrast, eMarketer has estimated that 55.8% of USinternet users purchase via the internet. The internet users in the UK arethe most frequent online buyers throughout the EU, according to theEurobarometer survey data, and are even more likely to buy online than thetechnophilic Finns or Swedes.

In Germany, only 3.8% of internet users surveyed report that theyfrequently buy products or services online. This is not surprising sinceGermans have a lower propensity to hold and use credit cards than thecitizens of other European countries.

No response0.1%

Never49.5%

Never again1.2%

Rarely14.9%

Occasionally27.2%

Fre-quently7.2%

Internet Users in the UK Purchasing Products andServices Online for Personal Use, by Frequency,November 2001



Occasionally16.1%

No response0.2%

Never55.2%

Never again0.7%

Rarely24.0%

Frequently3.8%

Internet Users in Germany Purchasing Products andServices Online for Personal Use, by Frequency,November 2001




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In both France and Italy, long considered internet laggards in WesternEurope, the Eurobarometer survey shows that a large percentage of internetusers, 72% and 80% respectively, report that they never buy online.

By contrast, Taylor Nelson Sofres found that a higher percentage ofinternet users in Germany, the UK, France and Italy had bought a good orservice online in the month prior to being surveyed. As the following chartshows, Germany is a leader in Europe, with 28% of internet users buyingonline. Taylor Nelson Sofres also measured online buying behavior inPoland and the Czech Republic, illustrating that the B2C market in two ofthe largest Eastern European economies remains largely underdeveloped.

No response0.1%

Never72.0%

Never again0.6%

Rarely12.9%

Occasionally11.4%

Frequently3.1%

Internet Users in France Purchasing Products andServices Online for Personal Use, by Frequency,November 2001



No response0.1%

Never79.7%

Never again0.9%

Rarely8.3%

Occasionally10.3%Frequently

0.7%

Internet Users in Italy Purchasing Products andServices Online for Personal Use, by Frequency,November 2001




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Taylor Nelson Sofres’ data, which reports purchases made within the 30days prior to the survey, are better defined than the more general responsecategories in the Eurobarometer study. However, the Eurobarometer figuresillustrate buying frequency, whereas the data in the chart above measurebehavior within a discrete time frame that may or may not be repeated overthe course of the year.

Online Shoppers in Selected Countries, 2001 (as a %of internet users)

US

33%

Germany

28%

Great Britain

24%

Korea

19%

Norway

19%

Ireland

18%

Canada

18%

Netherlands

18%

Denmark

18%

Australia

18%

Japan

17%

Finland

17%

Israel

16%

Portugal

14%

France

12%

Czech Republic

10%



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Spain

9%

Singapore

9%

Belgium

9%

Taiwan

8%

Hong Kong

7%

Italy

7%

China

6%

Poland

5%

Malaysia

4%

Argentina

3%

India

2%

Turkey

1%

Note: *Online shopper is defined as a internet user who has bought orordered goods or services on the internet during the past monthSource: Taylor Nelson Sofres, June 2001



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NetValue’s survey research found that in May 2001, Norway and the UKhad the highest percentage of internet users who actually made a securetransaction (most likely a purchase) online. Visitation figures to retail e-commerce sites (as a percentage of home internet users remained largelyconsistent in December 2001, usually of a month of more intense shopping,both online and off. However, with the exception of Denmark and Sweden,conversion rates in other European countries dropped precipitouslybetween May and December — although according to NetValue, they roseyear-over-year from December 2000 to December 2001. Growing economicuncertainty in the second half of 2001 may account for the May toDecember drop off in conversion rates.

E-Commerce Penetration in Selected EuropeanCountries, May & December 2001

Denmark

France

Germany

Italy

Norway

Spain

Sweden

UK

May 2001

Visiteda retail

e-commercesite

45.7%

68.9%

64.5%

–

68.6%

63.3%

39.9%

75.9%

Establisheda secure

connection

8.1%

39.2%

26.3%

–

45.1%

30.4%

6.9%

42.1%

December 2001

Visiteda retail

e-commercesite

50.4%

67.6%

62.4%

46.2%

44.8%

61.2%

40.5%

68.0%

Establisheda secure

connection

9.5%

17.3%

24.2%

6.9%

15.6%

18.9%

9.0%

29.4%

Source: NetValue, May 2001 & January 2002



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Cap Gemini Ernst & Young found that among a sample of Europeanssurveyed (including internet users and non-users), only 7% said that it wasextremely important to be able to buy from a retailer over the internet. Infact, of the 51 factors affecting shopping attitudes that Ernst & Youngincluded in its study, access to online buying ranked last among theresponses returned by survey participants. Overall, only 17% of Europeaninternet users reported that they use the internet for shopping.

Percent of European Internet Users Who Buy or ShopOnline, by Country, 2002

Finland

17%

28%

France

8%

14%

Germany

21%

14%

Italy

7%

14%

Netherlands

18%

28%

Norway

26%

22%

Spain

8%

16%

Sweden

27%

23%

UK

22%

13%

Buy online Shop online

Source: Cap Gemini Ernst & Young, April 2002



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In the US, consumers typically emphasize convenience as the main reasonwhy they like to shop online. By contrast, European consumers considerbetter prices to be their main motivating factor, according to data fromJupiter MMXI. This disparity is notable, though additional data arenecessary to confirm the Jupiter findings. Furthermore, as research fromA.T. Kearney has shown (see its 2000 report, Satisfying the ExperiencedOnline Shopper) the factors motivating online buyers differ substantiallyfrom country to country within Europe.

Factors Motivating Western European Consumers toBuy More Products Online, 2001 (as a % ofrespondents)

Better prices

57%

Better security

42%

Easier to compare products or prices

38%

Ability to return merchandise easily

32%

Faster delivery

31%

Easier to order

27%

Greater trust

27%

Quicker to complete buying

21%

Greater familarity

17%

Nothing

9%

Source: Jupiter Research, 2001



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Buyer DemographicsDemographic factors influence whether an individual shops or buys online.Consistent data from both the US and Europe suggest that socioeconomicstatus, as measured by education or income level, is positively correlatedwith online buying. Yet, this has been changing over time as more andmore middle-class internet users become familiar with the technology andexperience the internet as just another retail channel. During thisevolutionary period, however, it is important for marketers to understandthe online buying habits of different population subgroups.

GenderWomen have been slower to adopt the internet, and consequently havebeen less likely to purchase online than men. This gender gap is closing,but still exists in Europe, as the data below show. A significantly higherpercentage of male internet users in Europe than female internet usersreport that they frequently or occasionally buy online.

Despite their less frequent online purchasing behavior, women arenevertheless important markets for online retailers. Studies have shown that women influence the vast majority of household purchasing decisions.And, as Jupiter MMXI recently reported, while European women spend lesstime on the internet each month than men, they use their time moreeffectively–shopping, organizing travel, banking online and sending e-greeting cards. Men carry out the same tasks online, but they also spendmore time browsing, reading content and downloading software applications.

Noresponse

0.2%



Male Female

Never60.7%

Noresponse

0.3%

Never68.8%

Never again1.1%

Never again0.7%

Rarely16.5%

Rarely14.1%

Occa-sionally17.0%

Occa-sionally13.4%

Frequently4.5%

Frequently2.7%

Internet Users in the European Union Who PurchaseProducts or Services via the Internet, by Gender,November 2001


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AgeMost online buyers in Europe are in their twenties and thirties, as thefollowing chart illustrates. Older European internet users are the least likelyto purchase online. Seniors also constitute the smallest group of internetusers in Europe, quite in contrast to their active and growing participationin the US internet user population.

Internet Users in the European Union PurchasingProducts and Services Online for Personal Use, byAge, November 2001

15-24 25-39 40-54 55+

Frequently 2.5% 5.1% 3.7% 1.9%

Occasionally 11.5% 18.5% 17.1% 11.2%

Rarely 16.1% 16.3% 14.7% 13.0%

Never again 1.0% 1.0% 0.7% 1.0%

Never 68.6% 59.0% 63.7% 72.2%

No response 0.2% 0.1% 0.2% 0.8%




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Similar data was reported by GfK Media Research in June 2001, as thefollowing chart shows. The interesting detail of the GfK’s data is thatSpanish and French internet users who are in their teens and twentiesconstitute the majority of online consumers.

Online Consumers in Selected European Countries, byAge, 2001

UK

34%

47%

19%

Germany

36%

45%

19%

Netherlands

35%

54%

12%

Spain

51%

42%

7%

France

49%

37%

14%

Belgium

37%

49%

14%

14-29 yrs 30-49 yrs 50-69 yrs

Source: GfK Media Research, June 2001



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The teen market is a particularly important source of online consumers inEurope. Internet users in Europe tend to be younger than the averagepopulation, and teens are generally more open to new methods ofcommerce. Teen online spending is expected to increase dramatically asnew payment products are developed and the B2C market grows. Accordingto Datamonitor, while the growth rate in teen online spending in the US isexpected to be 63.3% compounded annually between 2001 and 2005, therate for Europe is expected to be far higher at 94.3%. A survey of teenageonline spending across seven European Union countries and the US byDatamonitor found that teenagers spent $483 million in 2001−a figureforecast to increase to $10.6 billion by 2005.

Socioeconomic StatusAround the world, early internet adopters were, on average, wealthier thanthe population at large. Although the demographic composition of internetusers is becoming closer to the population average, people in the topsocioeconomic strata–i.e., those with high incomes and/or educationallevels–continue to be over-represented in the population of internet users.Among all types of online activities, those individuals with highersocioeconomic status are more likely to use the internet to search for andpurchase products or services, and bank or trade electronically.

The same is true when socioeconomic status is measured in years ofeducation, as the following chart illustrates. Those with university degreeshave a more frequent propensity to buy online than those with fewer yearsof schooling.

Teenage Online Spending in the European Union, 2001& 2005 (in millions)

2001 $483

2005 $10,600

Source: Datamonitor, 2001


Internet Users in the European Union PurchasingProducts and Services Online for Personal Use, byYears of Education, November 2001

15 or less 16-20 21+

Frequently 2.3% 3.5% 4.5%

Occasionally 10.5% 14.3% 18.6%

Rarely 12.1% 15.4% 16.7%

Never again 0.9% 0.7% 1.1%

Never 73.8% 65.9% 58.9%

No response 0.4% 0.2% 0.2%




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Similarly, an internet user’s occupation is closely correlated with his or herpropensity to purchase goods and services online. According to theEurobarometer survey, fewer manual laborers tend to buy onlineoccasionally or frequently than managers. Curiously, farmers andfishermen report that they shop online more frequently than middlemanagers. One possible explanation is that, like the American farmers whoshopped from Sears catalogs at the turn of the last century, people inagriculture find it more convenient to order online than to travel to distantbrick-and-mortar stores.

Internet Users in the European Union PurchasingProducts and Services Online for Personal Use, byOccupation, November 2001

Farmer/fisher-man

Indepen-dent and

mana-gerial

Emplo-yee-

middlemanage-

ment

Manualworker

Retired House-wife

Stu-dent

Fre-quently

6.0% 5.8% 3.8% 3.5% 1.9% 3.7% 2.7%

Occa-sionally

16.2% 21.1% 16.6% 13.6% 9.4% 16.5% 10.4%

Rarely 22.5% 15.9% 15.4% 13.9% 13.9% 15.6% 16.9%

Neveragain

2.6% 1.3% 0.7% 0.9% 1.4% 0.3% 0.8%

Never 52.8% 55.8% 63.3% 68.0% 72.5% 63.7% 68.9%

Noresponse

0% 0.1% 0.2% 0.2% 0.9% 0.3% 0.2%




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LocationNot surprisingly, urbanites tend to buy online more frequently than rural citizens. In part, this is because the infrastructure to facilitate online buying–such as broadband internet access–is more widely availablein metropolitan areas. At the same time, however, there are confoundingvariables, such as income and education level, which are associated with urbanites and may influence frequency of online buying more thanmere location.

Internet Users in the European Union PurchasingProducts and Services Online for Personal Use, byGeographic Location, November 2001

Urban/metropolitan

Urban zone/suburban

Rural

Frequently 4.4% 3.2% 3.5%

Occasionally 16.1% 15.7% 14.2%

Rarely 16.2% 14.5% 15.8%

Never again 0.8% 1.0% 0.9%

Never 62.3% 65.4% 65.4%

No response 0.2% 0.3% 0.2%




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E. Category ReviewThis section examines some of the leading online retail categories ingreater detail. While certain product lines are apt to do well in most placesin the world, consumer e-commerce habits differ significantly fromcountry to country. For example, according to Taylor Nelson SofresInteractive (TNSI), which has surveyed internet consumers from a widerange of countries, books and CDs are the top two products that consumersin the UK and Germany buy online. Danes, in contrast, buy morecomputers online than books or CDs, while neighboring Finns prefer toshop for clothing via the internet. A large-scale survey of nearly 12,000European consumers by the Boston Consulting Group (BCG) revealedsimilar findings as the TNSI study. It clearly demonstrates that Germanyand the UK are the regional leaders in consumer-oriented online commerce.

The BCG study, released in July 2001, also shows that France continues tobe a laggard online. According to the Yankee Group, that situation willchange in 2002 as the French internet user population grows and moreconsumers embrace e-commerce. Likewise, the retail categories most likelyto benefit from the increased user base in both France and across Europe asa whole are those that have already achieved some degree of success online.

Leading Online Purchases by Consumers in SelectEuropean Countries, by Category, 2001 (as a % of totalonline population)

Germany UK France Italy Nether-lands

Spain

Books 40% 35% 9% 11% 16% 11%

Computerhardware/software

31% 32% 10% 11% 12% 12%

Music/video 28% 34% 10% 9% 15% 16%

Financial services 28% 24% 7% 6% 11% 17%

Travel 19% 27% 7% 6% 10% 12%

Event tickets 19% 20% 6% 4% 8% 13%

Apparel 19% 17% 5% 2% 10% 8%

Collectibles/auctions 15% 12% 5% 3% 5% 3%

Consumer electronics 11% 13% 3% 6% 3% 4%

Toys 13% 13% 3% 1% 4% 3%

Groceries 14% 11% 3% 2% 3% 2%

Automobiles 2% 2% 0% 0% 0% 1%

Source: Boston Consulting Group (BCG), July 2001



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According to a study by Pro Active International, the top consumer e-commerce sector in Europe is computer hardware, while books and travelcommand an equal portion of the market. In the US, by contrast, the onlinetravel sector remains the clear leader, despite the momentary declines itexperienced in the wake of the events of 11 September 2001.

Top Consumer E-Commerce Sectors in the US andEurope, 2001

Computer hardware

18%

8%

Travel

12%

22%

Books

12%

8%

Durable goods

11%

16%

Europe US

Note: As a % of online private purchasesSource: Pro Active International, July 2001



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During the 2001 holiday shopping season, items typically purchased asgifts dominated the e-commerce consumer categories, as the following datafrom Jupiter MMXI show. Surprisingly, groceries (which may include non-food items purchased from grocery stores) dominated online consumerspending in the UK.

TravelAs in the US, travel sales constitute a large portion of the retail e-commercemarket. In Europe, online travel may amount to over EUR 20 billion by2006, according to forecasts from Jupiter MMXI. Jupiter has measured adoubling in visitors to several popular travel sites in 2001, includingExpedia.co.uk, Go-fly.com and OTC-UK.com in the UK, Lastminute.com inGermany, Renfe.es, Iberia.es and Viajar.com in Spain, andMyswitzerland.com in Switzerland.

Consumer E-Commerce Spending in SelectedEuropean Countries, by Category, Holiday Season2001 (in € millions)Category France Germany Italy Spain Sweden UK Europe

total

Books €17 €65 €19 €32 €17 €76 €290

Music €12 €58 €4 €4 €10 €62 €187

Videos andDVDs

€2 €9 €2 €1 €1 €11 €33

Software €12 €35 €18 €6 €10 €52 €170

PCs €28 €110 €31 €11 €25 €90 €410

Peripherals €12 €36 €10 €7 €9 €29 €146

Consumerelectronics

€13 €56 €24 €5 €5 €32 €163

Groceries €39 €97 €6 €11 €16 €199 €424

Apparel andAccessories

€41 €76 €10 €11 €12 €59 €265

Toys €3 €8 €4 €1 €1 €17 €43

Sports,concerts andevents tickets

€6 €13 €7 €3 €2 €10 €49

Footwear €2 €8 €2 €1 €1 €3 €22

Personalcare

€2 €9 €3 €1 €1 €11 €35

Other €82 €150 €58 €9 €26 €178 €633

Sportinggoods

€2 €8 €5 €1 €2 €6 €32

Total €274 €738 €202 €104 €137 €835 €2,901




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The UK is the largest online travel market in Europe, according to JupiterMMXI, with almost six million visitors recorded in January 2002. Germanyand France followed with 5.1 and 2.5 million unique visitors, respectively,in January 2002. Italy and Sweden both had 1.2 million unique visitors totravel sites, while Spain recorded 645,000.

Germany’s Bahn.de, the site for the national rail system, and the UK’sdiscount travel site Lastminute.com are the leaders in Europe in terms ofunique visitors. Easyjet.com, the discount airline, is number three.

Unique Visitors to Travel Sites in Europe, by Country,January 2002 (in millions)

UK 6.0

Germany 5.1

France 2.5

Italy 1.2

Sweden 1.2

Spain 0.6

Source: Jupiter MMXI, February 2002


Top 10 Travel Sites in Europe, January 2002 (inthousands of unique visitors)

1. Bahn.de 2,120

2. Lastminute.com 1,718

3. Easyjet.com 999

4. Trenitalia.com 996

5. Ryanair.com 926

6. Expedia.co.uk 922

7. Voyages-sncf.com 818

8. Go-Fly.com 669

9. Britishairways.com 640

10. Expedia.com 636

Source: Jupiter MMXI, February 2002



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More detailed data on the on- and offline travel market in Europe andaround the world can be found in eMarketer’s The Travel MarketWorldwide Report.TM To order copies, visit the eMarketer website athttp://www.emarketer.com or send an e-mail to [email protected].

Other RetailersResearch by Jupiter MMXI shows that Europeans have been particularlyloyal to the retail websites that they use for online shopping. FromNovember 2001 through February 2002, German online retailers retainedmore visitors who used the site for the first time within this period thanretailers in other European countries. By comparison to Germany, Italy andSwitzerland had the lowest retention rates.

Different retail brands have different abilities to retain customers. Forexample, Amazon–the number one online retail site in Europe according todata from Jupiter MMXI–had a 28% retention rate (measured by thepercentage of visitors who returned to the site within three months) inSwitzerland, but a 40% retention rate in the UK.

Retention Rates for European Online Retailers, byCountry, November 2001-February 2002 (as a % offirst-time shoppers retained by sites)

Germany 75.1%

UK 72.5%

France 64.9%

Spain 57.0%

Switzerland 51.8%

Italy 51.5%

Source: Jupiter MMXI, March 2002




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In the UK, Tesco.com has a high level of loyalty, with more than one third(34.5%) of visitors in November 2001 still going back to the site threemonths later. However, brick-and-mortar brands such as Argos, Comet andJohn Lewis only retained between 12% and 16% of their Novembervisitors. Clearly, more market research is needed to determine what factorslead to greater or less consumer retention.

Top 10 Retail Sites in Europe, February 2002 (inthousands of unique visitors)

1. Amazon.de 4,432

2. Amazon.com 3,415

3. Amazon.co.uk 2,985

4. Amazon.fr 1,536

5. Tesco.com 1,074

6. FNAC.com 971

7. Quelle.de 945

8. Tchibo.de 935

9. Kelkoo.com 927

10. Otto.de 896

Source: Jupiter MMXI, March 2002


VIII

Methodology 7

I Introduction 11








Index of Charts 197


189



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The widespread diffusion of mobile phones and digital TV in Europe hasraised expectations that these non-PC internet technologies will becomeimportant selling channels. According to Gartner G2, the PC will be used tocomplete only 73% of B2C purchases in Europe by 2005. However, thisforecast sounds excessively optimistic considering that mobile internet useremains quite modest in Europe except for short messaging and thedownloading of ring tones and icons. In Western Europe, these two serviceshave achieved a 73% and 24% penetration rate among wireless deviceusers, according to Strategy Analytics.

The Yankee Group predicts t-commerce revenues in Europe will growrapidly from an estimated $267.5 million in 2001 across Europe, to justover $17 billion by 2006.

Mobiledevices

10%DTV17%

PC73%

B2C E-Commerce in Europe, by Access Device, 2005

Note: Total online retail sales=$225 billionSource: GartnerG2, March 2002


Projected T-Commerce Revenues in Western Europe,2001 & 2006 (in millions)

2001 $267.5

2006 $17,000.0

Source: Yankee Group, 2001



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Another heady forecast comes from Accenture, which predicts that onethird of European businesses will be selling through internet-connectedtelevision by 2004. Note, however, that this figure is based on surveys ofbusiness leaders, and does not address whether and to what extentEuropean consumers will buy through iTV channels.

Interactive TV is finally reaching its potential. To make the most of theopportunity, get eMarketer’s Interactive TV: Reality & OpportunityReport.TM To order copies, visit the eMarketer website atwww.emarketer.com or send an e-mail to [email protected].

Mobile commerce remains an elusive goal of internet marketers in Europe. The International Data Corporation (IDC) estimates that 23 millionpeople in Western Europe will be using their mobile phone to buy travelproducts and services by 2005. IDC also predicts that 49 million WesternEuropeans will use their mobile phones to buy tickets for publictransportation by 2005. In terms of revenues, GartnerG2 estimates that by2005, m-commerce sales in France, Germany and the UK will add up toapproximately $14 billion.

Percent of European Businesses in B2C Sector UsingTelevision Commerce, 2001 & 2004

2001 3%

2004 33%

Source: Accenture, 2001


Online Retail Sales via Mobile Devices in France,Germany and the UK, 2002 & 2005 (in billions)

France

$0.15

$4.07

Germany

$0.24

$6.28

UK

$0.14

$3.83

2002 2005

Source: GartnerG2, March 2002



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Consumer attitudes will have to go through a sea change if internet retailershope to realize even these modest mobile commerce revenue estimates. TheBoston Consulting Group (BCG) found that during 2000, one-third of earlyusers in Europe abandoned m-commerce after only a few tries. And a surveyby A. T. Kearney found that the number of mobile users who said theyintended to use their phones for m-commerce fell from 32% in June 2000 to4% in June 2001, declining still further to 1% as of January 2002.

One of the great uncertainties in the online retail sector is the type ofcontent consumers are willing to buy, and how much they are willing topay for information. This issue is particularly important in the Europeanmarket, since internet service providers and mobile phone operators havebeen anticipating large revenue streams for mobile commerce, in partcomposed of fees for content delivered to the consumer’s handset.However, a recent study of internet payment habits in Europe casts doubtson just how much Europeans will pay for content. According to a survey ofEuropean internet users conducted by Jupiter MMXI, 47% of respondentswould not consider paying for internet content at all.

Intent to Use Mobile Phone for Online Purchasingamong Internet-Enabled Phone (IEP) Users Worldwide,January 2002 (as a % of respondents)

Japan 7%

Europe 1%

Rest of Asia* 1%

US 1%

Worldwide 1%

Note: n=5,600 mobile phone users; *includes China, Hong Kong, Korea,Taiwan, Singapore and AustraliaSource: A. T. Kearney , February 2002



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Currently, most Europeans seem more willing to pay for content via theirmobile phones–primarily services like different ring tones, logos, games oricons– compared to content delivered to their PCs. As the following chartshows, in 2001, Europeans spent EUR 590 million on mobile phone content,compared to EUR 252 million spent on content via their PCs. According toJupiter MMXI, by 2006, European consumers will spend EUR 3.3 billion oncell-phone content, compared to EUR 1.7 billion on home computers. Whileconsumer interest in switching ring tones may be music to the ears ofcompanies such as Kiwee, a French provider of mobile ring-tones andlogos, which claimed 1.6 million paying clients and projected revenues ofEUR 15 million for the end of 2001, it is doubtful that Europeans will payfor more complex information via their phones.

European Consumer Spending on Online and MobileContent, 2001-2006 (in millions of euros)

2001

€252

€590

2002

€337

€860

2003

€490

€1,407

2004

€737

€2,233

2005

€1,101

€2,915

2006

€1,686

€3,280

PC internet Mobile




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A number of companies are, however, banking on revenue streams fromso-called short message alerts, such as sport scores and news delivered toconsumers’ handsets. According to one estimate, mobile phone providerssuch as Orange and Vodaphone currently generate 10% of their revenuesthrough SMS. One firm, Eurosport, is selling pre-paid instant news updatesfor roughly 15 cents apiece to consumers in several European countries.Nevertheless, it is questionable whether this business model is sustainableover time, given the availability of other un-metered options for gettingsuch information, such as over the radio or on television.

Gloomy forecasts aside, some researchers remain optimistic about thelong-term prospects for mobile content. In an October 2001 report, theYankee Group asserted that premium content will account for 75% of allm-commerce transactions in Western Europe, followed by remote paymentfor goods and services at 20% and point-of-sale transactions at 5%. By2005, the Yankee Group projects an m-commerce market valued at $53billion in Western Europe.

Another important factor in the development of the mobile contentmarket is which businesses will gain control of the revenue streams. TheYankee Group contends that as intermediaries, i.e., mobile portals andproviders of goods and services, enter the marketplace, operators’ share ofrevenues will continue to decline, before stabilizing at around 8% by 2006.


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M-Commerce Revenues in Western Europe, 2001-2006(in billions)

2001

$0.10

$0.49

$0.59

2002

$0.41

$2.69

$3.10

2003

$1.02

$8.58

$9.60

2004

$1.78

$18.77

$20.55

2005

$3.00

$33.70

$36.70

2006

$4.18

$48.83

$53.01

Operator revenues Non-operator revenues Total

Source: Yankee Group, October 2001


Operator Share of M-Commerce Revenues in WesternEurope, 2001-2006

2001 20.4%

2002 15.3%

2003 11.9%

2004 9.4%

2005 8.9%

2006 8.6%

Source: Yankee Group, October 2001


Methodology 7

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Index of Charts 197


197



198


Index of ChartsCore European Countries 16

Age Breakdown of Selected European Countries, 2002 18

Age Breakdown of Selected European Countries, 2002 19

Euro-Zone Gross Domestic Product (GDP) Growth Rates, 2001-2003 (in %growth per year) 20

Gross Domestic Product (GDP) Growth Rates for the Euro-Zone and EU-15, Q11999-Q4 2001 21

Gross Domestic Product (GDP) Growth Rates for Europe, the US and Japan,2000 & 2001 22

Gross Domestic Product (GDP) Growth Rates for Europe, the US and Japan,2001 22

Quarter-over-Quarter Gross Domestic Product (GDP) Growth Rates in SelectedEuropean Countries, Q1 2000-Q4 2001 23

Information and Communication Technology (ICT) Market Worldwide, byRegion, 2002 26

Western European Information and Communication Technology (ICT) Market,by Country, 2002 27

Information and Communication Technology (ICT) Expenditure in SelectedEuropean Countries, Japan and the US, 1999 & 2000 (as a % of GDP) 28

Annual Growth Rates for Western European Information and CommunicationTechnology (ICT) Market, by Segment, 2001-2003 29

Annual Growth Rates for Information and Communication Technology (ICT)Market Worldwide, by Region, 2001-2003 30

Value of Western European Information and Communication Technology (ICT)Market, 2002 (in billions and as % growth per year) 30

IT Spending Worldwide, by Region, 2001 (in billions) 31

Estimated Worldwide IT Spending, by Region, 2001 (in billions and as a % oftotal spending) 31

Worldwide IT Spending, by Region, 2000 & 2003 (as a % of world total) 32

Breakdown of Worldwide IT Services Market, by Region, 2001 (in billions) 33

Breakdown of Worldwide IT Services Market, 2005 (in billions) 33

Information Technology Spending in Leading European Markets, 2001-2005 (inbillions) 34

Estimated European IT Spending, by Category, 2001 (in billions and as a % oftotal spending) 34

Telecommunications Spending, by Region, 2000 & 2004 (in billions) 36

Western European Telecommunications Spending, by Category, 1999-2004 (inbillions) 37

Eastern European Telecommunications Spending, by Category, 1999-2004 (inbillions) 38

Annual Rental for National Leased Lines in the European Union, 2000 39

Annual Rental for International Leased Lines from European Union, 2000 39

PC Unit Sales Worldwide, by Region, 2001 (as a % of global market) 40

PC Market Revenue Forecast Worldwide, by Region, 2001 (in billions) 40

Leading PC Vendor Shipment Estimates in the EMEA* Region, Q3 2001 (inthousands of units and as a % of market share) 41

Leading PC Vendor Shipment Estimates in Latin America, Q3 2001 (inthousands of units and as a % of market share) 42


199


Index of ChartsLeading PC Vendor Shipments in the EMEA* Region, Q4 2000 & Q4 2001 (inthousands of units and as a % of market share) 42

Leading PC Vendor Shipments in the EMEA* Region, 2000 & 2001 (inthousands of units and as a % of market share) 43

PC Unit Sales in Eastern Europe, by Country, 2000 (in millions) 43

PC Unit Sales and Market Revenues in Russia, 1997-2001 (in billions of dollarsand millions of units) 44

Comparative Estimates: Handheld Device Shipments in Western Europe, 2000& 2001 (in millions of units) 44

PDA Unit Sales in Western Europe, 2000, 2002, 2004 & 2006 (in millions) 45

Mobile Device Shipments in Western Europe, 2000-2003 (in millions of units) 45

Handheld* Market Share in Western Europe, by Vendor, 2000 & 2001 46

Handheld Device Market Share in Western Europe, by Platform, Q3 2001 47

Handheld Device Market Share in Western Europe, by Platform, Q4 2000 & Q42001 47

Handheld Device Shipments in Western Europe, by Vendor, Q4 2000 & Q4 2001(in thousands of units and as a % of market share) 48

Leading European Countries’ Aggregate Spending on E-Business Technology,2001-2004 (in billions) 50

E-Business Spending, by Region, 2001 (as a % of IT Budgets) 51

IT Spending on Web Initiatives in Selected Countries, 2001 (as a % of IT budget)51

Main Telephone Lines per 100 Inhabitants in Selected European Countries,2000 & 2001 54

Main Telephone Lines per 100 Inhabitants in Selected European Countries,2000 & 2001 55

Main Telephones Lines per 100 Inhabitants Worldwide, by Region, 2000 & 2001 56

Mobile Telephone Subscribers in Selected European Countries, 2000 & 2001(as a % of total telephone subscribers) 59

Mobile Telephone Subscribers in Selected European Countries, 2000 & 2001(as a % of total telephone subscribers) 60

Mobile Telephone Subscribers per 100 Inhabitants in Selected EuropeanCountries, 2000 & 2001 61

Mobile Telephone Subscribers per 100 Inhabitants in Selected EuropeanCountries, 2000 & 2001 62

Mobile Telephone Subscribers per 100 Inhabitants Worldwide, by Region, 2000& 2001 63

Wireless Subscribers in Europe, 2001-2005 (in millions) 64

Comparative Estimates: Wireless Subscribers in Western Europe, 2001-2006(in millions) 64

Wireless Subscribers in Selected European Countries, 2000 & 2001 (in millions) 65

Wireless Subscribers in Selected European Countries, 2000 & 2001 (in millions) 66

Mobile Phone Subscribers in Russia, 2001 & 2002 (in millions) 66


200

Europe eCommerce:B2B & B2C

Index of ChartsWireless Subscribers in Eastern Europe, 1998-2007 (in millions and as a % ofsubscribers worldwide) 67

Wireless Subscribers in Western Europe, by Subscription Type, 2001-2006 (inmillions and as a % of total wireless subscribers in Western Europe) 69

Wireless Subscribers in Selected European Countries, by Subscription Type,March, June & September 2001 70

Wireless Subscribers in Selected European Countries, by Subscription Type,March, June & September 2001 71

Western European Handset Sales, by Technology, 2001-2006 (in millions) 71

Subscriptions to Selected 3G Wireless Services in Europe, 2001-2010 (inmillions) 72

Revenue from 3G Wireless Services in Europe, 2001-2010 (in billions) 73

European Market for Multimedia Messaging Service (MMS), 2002-2006 74

Multimedia Messaging Service (MMS) Market in Europe, 2002 & 2006 (inbillions) 74

Mobile Messaging and Infotainment Revenues in Western Europe, 2001 &2007 (in billions of €) 74

European Bandwidth Demand, 1999-2002, 2005 & 2010 (Gigabit rings) 75

Peak Adjusted European Bandwidth Demand in Gigabit Rings, by Sector, 1999-2002, 2005 & 2010 76

Enterprise Broadband Demand of Leased Circuits, by Region, 2000-2004 (inthousands of lines) 76

Bandwidth Demand in Europe, by Sector, 2001, 2005 & 2010 (as a % of totalbandwidth demand) 77

Broadband Households Worldwide, by Region, 2000–2004 (in thousands) 78

Western European Households with Broadband Access, 2000-2006 (inmillions) 79

Broadband Internet Households in Selected European Countries, December2001 (in millions and broadband as a percent of total households) 80

Broadband Markets in Selected European Countries, 2000-2010 80

Residential Broadband Subscribers in Western Europe, by Access Technology,2001-2006 (in millions) 81

Penetration Rates for Household Broadband Internet Access in Europe (High-and Low-Growth Scenarios), by Access Technology, 2001-2006 82

Monthly Access Costs for ADSL and Cable Modem Internet Access in SelectedEuropean Countries, December 2001 82

DSL Subscribers Worldwide, by Region, End of 2001 (in thousands) 83

Business Internet Subscribers in Western Europe, by Access Technology, 2001& 2006 (in millions) 83

European Business DSL Revenues, 2000-2006 (in millions €) 84

PCs per 100 Inhabitants in Selected European Countries, 2000 & 2001 85

PCs per 100 Inhabitants in Selected European Countries, 2000 & 2001 86

PCs per 100 Inhabitants Worldwide, by Region, 2000 & 2001 87

PCs in Use Worldwide, by Region, 1995, 2000, 2001 & 2007 (in millions and as a% of total households) 88

Access Devices Used to Connect to the Internet at Home in the EU, byCountry, November 2001 88


201


Index of ChartsAccess Devices Used to Connect to the Internet at Home in the EU, byCountry, November 2001 89

iTV Households Worldwide, by Region, 2001-2005 (in millions) 91

Comparative Estimates: European iTV Households, 1999, 2001, 2003 & 2005(in millions) 91

Digital TV Adoption in Selected European Countries, 2001 (as a % ofhouseholds) 92

PDAs in Use in Western Europe, 2000, 2002, 2004 & 2006 (in millions of units) 94

Average Response Time, Packet Loss (past 30 days) and Number of RoutersWorldwide, by Region, March 2002 95

Top 10 Inter-regional Internet Hub Cities, by Inter-regional Internet Bandwidth,2001 (in Mbps) 96

Internet Hosts in Selected European Countries, January 2000, January 2001 &January 2002 97

Host Penetration of Top Level Domains in Europe, January 2002 98

Residential and Business Dial-up Internet Access Subscribers in WesternEurope, 2001 & 2006 ( in millions) 99

Tier 1 Internet Service Provider (ISP) Market Share for Selected EuropeanCountries, Q3 2001 100

Internet Access Subscribers in Selected European Countries, Q3 2001 (inmillions and as a % of total internet access subscriber market) 100

European Union Internet Access Market, by Internet Service Provider (ISP),2000 & 2001 101

Internet Access Revenues in Selected European Countries, 2001-2006 (inmillions) 101

E-Commerce Revenues in Europe, 2000-2004 (in billions) 104

E-Commerce Revenues in Western Europe, 2001 & 2005 (in billions of €) 104

Business and Consumer E-Commerce in Europe, 2001 105

Distribution of E-Commerce Revenues Worldwide, by Region, 2001 105

E-Commerce Revenues in Europe and the US, 2001-2004 (in billions) 106

SME E-Business Revenues Worldwide, by Region, 2001, 2003 & 2006 (inbillions) 107

B2B E-Commerce Revenues in Europe, 2000-2004 (in billions) 111

B2B E-Commerce Revenues in Europe, 2000 & 2005 (in billions) 112

B2B E-Commerce Revenues in Europe, 2001 & 2005 (in billions) 112

B2B E-Commerce Forecast (Internet and EDI Transactions) for Europe, 2001-2005 (in billions) 112

B2B E-Commerce in Central Europe, 2001 & 2006 (in billions) 113

Five Priority Spending Areas for European Corporate IT Departments, 2002 (asa % of respondents) 114

European Expenditure Plans for E-Commerce Initiatives within the Next Year,2001 (as a % of European executives) 115

Plans for Internet-Related Expenditures over the Next Year among Companiesin Denmark, France and the UK, 2001 (as a % of respondents) 116

Primary Focus of E-Business Strategies among Large European Companies,2001 116


202


Index of ChartsTop E-Business Strategic Objectives among North American and EuropeanCIOs, 2001 117

European Business Lines Using E-Commerce Initiatives, 2001 (as a % ofEuropean executives) 117

External and Internal Use of the Internet by Businesses in Denmark, Franceand the UK, 2001 (as a % of respondents) 118

Adoption of Internet Business Solutions by Businesses in France, Germanyand the UK, by Industry, 2001 (as a % of respondents) 119

Adoption of Internet Business Solutions by Businesses in France, Germanyand the UK, by Business Size, 2001 (as a % of respondents) 120

E-Business Strategy Implementation among Leading European Companies,2001 120

Use of Internet Business Solutions among Companies in France, Germany, theUK and the US, 2001 (as a % of respondents) 121

Security Problems Encountered by European Companies, by Business Sizeand Sector, 2001 (as a % of respondents) 122

Measures Taken by European Companies to Protect Against SecurityProblems, by Business Size and Sector, 2001 (as a % of respondents) 123

European Companies with an Internet Connection, by Business Size andSector, 2001 (as a % of respondents) 124

European Companies with a Website, by Business Size and Sector, 2001 (as a% of respondents) 125

European Companies’ Website Operating Capabilities, 2000 & 2001 (as a % ofrespondents) 126

European Company Websites Allowing Direct Sales to Customers, by Country,2001 (as a % of companies with a website) 127

European Company Websites Allowing Direct Sales to Customers, by BusinessSize and Sector, 2001 (as a % of companies with a website) 128

Percent of Large Companies’ Suppliers Linked via the Internet, by Region,2001 129

Percent of Large Companies’ Websites with Transaction Capabilities, byRegion, 2001 129

Percent of Supplies Purchased Online by European Companies, by Country,Business Size and Sector, 2001 (as a % of companies connected to theinternet) 131

Percent of Total Sales Made Online by European Companies, by Country,Business Size and Sector, 2001 (as a % of companies connected to theinternet) 132

Barriers to the Use of Internet Business Solutions in the UK, France andGermany , 2001 (as a % of respondents) 133

Enterprise Resource Planning (ERP) Applications Services Market in WesternEurope, 2001 & 2005 (in billions) 134

Western European Enterprise Resource Management Application Revenues,by Country, 2000 (in millions) 135

Application Hosting Expenditures in Europe, 2001 & 2005 (in millions) 137

Barriers to Deploying Application Hosting Services in Europe, 2001 137

Web Hosting Services Revenues in Western Europe, 2001 & 2006 (in billions) 138


203


Index of ChartsApplication Service Provider Revenues in Western Europe, 2000 & 2005 (inbillions) 138

Global Spending on ASP Services, by Region, 2000-2005 (in millions) 139

Use of ASPs in the UK, by Business Size, 2002 (as a % of respondents) 139

Use of Outside Resources by Companies in France and the UK, 2001 (as a % ofrespondnets) 140

European Awareness of Different ASP Suppliers, 2001 141

Characteristics Sought in Providers of Outside Resources by Companies inFrance and the UK, 2001 (as a % of respondents) 142

Breakdown of Public Exchanges, by Primary Geographic Region Served,2001 143

Breakdown of B2B Exchange Ownership, 2001 144

Percent of Leading Global Companies Participating in Online Exchanges, byRegion, 2001 144

Participation in Online Exchanges among Large European Companies,2001 145

European Companies Buying and Selling Products/Services through OnlineMarketplaces, 2001 (as a % of companies connected to the internet) 145

European Companies Buying and Selling Products/Services through OnlineMarketplaces, 2001 (as a % of companies connected to the internet) 146

European Companies Buying and Selling Products/Services through OnlineMarketplaces, by Business Size and Sector, 2001 (as a % of companiesconnected to the internet) 147

European Enterprises Using Specialized B2B Marketplaces for Procurementand Sales, 2001 148

Exchange Profile: CPGmarket.com Membership and Transaction Activity,March 2002 149

Exchange Profile: Goodex Transaction Activity as of December 2001 149

Exchange Profile: HUBWOO Membership and Transaction Activity, 2001 150

Exchange Profile: Value of Online Auctions Conducted via Exiros, by Country,2002 (in millions) 150

E-Marketplace Application Revenues in Western Europe, 2001 & 2005 (inbillions) 151

B2C E-Commerce Revenues in Europe, 2000-2004 (in billions) 155

Travel and Consumer Goods Purchased Online in Europe, 2002 (in billions)156

B2B and B2C E-Commerce in Europe, 2001 & 2004 156

B2C E-Commerce Spending in Europe, 2002-2006 (in billions of €) 157

B2C E-Commerce Sales in Europe, 2001, 2002 & 2005 (in billions) 157

Online Retail Sales in Europe, 2002 & 2005 (as a % of total retail sales) 157

B2C E-Commerce Revenues in Western Europe, 2000-2006 (in billions) 158

Comparative Estimates: B2C E-Commerce Revenues in Europe, 2000-2006 (inbillions) 159

Distribution of E-Commerce in Western Europe, by Country, 2001 160

B2C E-Commerce Spending in Selected Western European Countries, 2001 (inbillions) 161

Comparative Estimates: B2C E-Commerce Revenues in the UK, 2000-2005 (inbillions) 162


204


Index of ChartsComparative Estimates: B2C E-Commerce Revenues in Germany, 2000-2005(in billions) 163

Comparative Estimates: B2C E-Commerce Revenues in France, 2000-2006 (inbillions) 164

Comparative Estimates: B2C E-Commerce Revenues in Italy, 2000-2005 (inbillions) 164

European Online Retail Spending, Holiday Season 2000 & 2001 (in billions of €) 166

European Online Retail Spending, December 2000 & December 2001 (inbillions of €) 166

European Retail Spending, by Country, December 2001 (in millions) 167

Percent of E-Commerce Site Visitors Who Established a Secure Connection inSelected European Countries, December 2001 167

E-Commerce Sales Growth in Europe, by Category, November-December 2001(as a % change from November-December 2000) 168

EU Internet Users Purchasing Products and Services Online for Personal Use,June & November 2001 169

Internet Users in the UK Purchasing Products and Services Online for PersonalUse, by Frequency, November 2001 170

Internet Users in Germany Purchasing Products and Services Online forPersonal Use, by Frequency, November 2001 170

Internet Users in France Purchasing Products and Services Online for PersonalUse, by Frequency, November 2001 171

Internet Users in Italy Purchasing Products and Services Online for PersonalUse, by Frequency, November 2001 171

Online Shoppers in Selected Countries, 2001 (as a % of internet users) 172

Online Shoppers in Selected Countries, 2001 (as a % of internet users) 173

E-Commerce Penetration in Selected European Countries, May & December2001 174

Percent of European Internet Users Who Buy or Shop Online, by Country,2002 175

Factors Motivating Western European Consumers to Buy More ProductsOnline, 2001 (as a % of respondents) 176

Internet Users in the European Union Who Purchase Products or Services viathe Internet, by Gender, November 2001 177

Internet Users in the European Union Purchasing Products and ServicesOnline for Personal Use, by Age, November 2001 178

Online Consumers in Selected European Countries, by Age, 2001 179

Teenage Online Spending in the European Union, 2001 & 2005 (in millions) 180

Internet Users in the European Union Purchasing Products and ServicesOnline for Personal Use, by Years of Education, November 2001 180

Internet Users in the European Union Purchasing Products and ServicesOnline for Personal Use, by Occupation, November 2001 181

Internet Users in the European Union Purchasing Products and ServicesOnline for Personal Use, by Geographic Location, November 2001 182

Leading Online Purchases by Consumers in Selected European Countries, byCategory, 2001 (as a % of total online population) 183


205


Index of ChartsTop Consumer E-Commerce Sectors in the US and Europe, 2001 184

Consumer E-Commerce Spending in Selected European Countries, byCategory, Holiday Season, 2001 (in € millions) 185

Unique Visitors to Travel Sites in Europe, by Country, January 2002 (in millions) 186

Top 10 Travel Sites in Europe, January 2002 (in thousands of unique visitors) 186

Retention Rates for European Online Retailers, by Country, November 2001-February 2002 (as a % of first-time shoppers retained by sites) 187

Top 10 Retail Sites in Europe, February 2002 (in thousands of unique visitors) 188

B2C E-Commerce in Europe, by Access Device, 2005 190

Projected T-Commerce Revenues in Western Europe, 2001 & 2006 (in millions) 190

Percent of European Businesses in B2C Sector Using Television Commerce,2001 & 2004 191

Online Retail Sales via Mobile Devices in France, Germany and the UK, 2002 &2005 (in billions) 191

Intent to Use Mobile Phone for Online Purchasing among Internet-EnabledPhone (IEP) Users Worldwide, January 2002 (as a % of respondents) 192

European Consumer Spending on Online and Mobile Content, 2001-2006 (inmillions of euros) 193

M-Commerce Revenues in Western Europe, 2001-2006 (in billions) 195

Operator Share of M-Commerce Revenues in Western Europe,2001-2006 195


206


Also Available from eMarketer

Asia Online: Demographics, Infrastructure, Usage Patternsand eCommerce Trends

■ Economy & infrastructure■ Internet users & demographics■ eCommerce, E-Finance & E-Advertising■ Country profiles

ASPs■ Market size & growth■ Industry leaders■ Usage patterns■ Customer satisfaction

Brazil Online: Demographics, Usage Patterns and E-CommerceTrends

■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising

Broadband■ Users by access method (dial-up, fiber, DSL, cable, satellite,

wireless)■ Residential and business usage■ Access revenues■ User demographics■ Country profiles

CRM■ Market size & growth■ Leading vendors■ Budgeting & implementation

eBanking■ Online banking around the world (US, Europe, Asia)■ Mobile banking■ Electronic bill presentment and payment

eCanada■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising

eCommerce: B2B■ E-Commerce: B2B revenues around the world, country by

country■ E-Commerce: B2B by industry■ Internet penetration among businesses■ Online marketplaces, auctions and exchanges

eCommerce: B2C■ E-Commerce: B2C revenues worldwide■ Top B2C categories■ Online shoppers, buying frequency and size of transactions■ E-Consumer attitudes and behaviors


206


207


North America Online■ User demographics worldwide■ Age, gender and race■ Income, education and occupation■ Usage patterns

eGlobal■ Internet infrastructure, by region■ Users and usage, by region■ E-Demographics, by region■ E-Commerce, by region

eHealth■ Consumer demographics and attitudes■ Healthcare personnel, demographics and usage■ B2C spending■ B2B spending

eInvesting■ Online brokerages■ Online mutual funds■ Online asset management■ Online investment advice

eMail Marketing■ E-Mail marketing revenues worldwide■ E-Mail users and user demographics■ Permission, opt-in and opt-out■ E-Mail marketing techniques and strategies

ePoland■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising

ePrivacy & Security■ Consumer attitudes & behavior toward online privacy■ Online fraud■ Credit card security■ Corporate security (hacking and denial-of-service attacks)■ Virus attacks

Europe Online■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising■ Country profiles

eWireless■ Mobile Internet use around the world, country by country■ M-Commerce■ M-Finance■ M-Advertising


207


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Interactive Television■ User forecast■ Revenue forecast■ Business attitudes & behavior■ User attitudes & behavior

Japan Online: Demographics, Usage Patterns and E-CommerceTrends

■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising

Latin America Online: Demographics, Infrastructure, UsagePatterns and E-Commerce Trends

■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising■ Country profiles

Marketing Online to Kids & Teens■ Demographics■ Advertising & marketing■ E-Commerce■ Special considerations

Online Advertising: Statistics, Strategies, Tools and Trends■ eAdvertising revenues worldwide■ Spending by ad format (banner ads, sponsorships, e-mail, etc.)■ Spending by industry category■ Measurements and standards (click-through rates, CPMs, ROI)

Online Marketing■ Viral marketing■ Direct marketing vs. Branding■ Search engine optimization■ Affiliate programs■ Classifieds■ Coupons

For more information, or to order a copy, contact eMarketer at:

Phone: 212.677.6300 Fax: 212.777.1172

eMail: [email protected] Web: www.emarketer.com

For media inquiries:Terry Chabrowe, [email protected]

For inquiries about this report or other eMarketer reports:Nick Fainelli, New Business Development, [email protected]


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europe e-commerce: b2b & b2c june 2002...v total e-commerce 103 vi b2b e-commerce 109 vii b2c...

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