Euro Internet economy worth $1.2 trillion by 2004

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by Douglas F. Gray

(IDG) -- The European Internet economy will be a $1.2 trillion market by 2004, equal to nearly 15 percent of Western Europe's current GDP (gross domestic product) value, according to a new study from Gartner Group Inc.

The electronic-commerce market in Europe, which is currently worth $40.8 billion, will grow to $1.1 trillion in the same time period, making up the majority of the increase. The four countries leading the e-commerce boom in Europe today will continue to lead in 2004, Nick Smith vice president of Gartner Group Services said in a press conference Thursday.

The current leaders in Europe are Germany, with an estimated $12.6 billion in e-commerce transactions this year; the U.K., with $11.8 billion; the Netherlands, with $5.7 billion, and France, with $2.7 billion. By 2004, those numbers will have grown to $317 billion in Germany, $235.6 billion in the U.K., $91.6 billion in the Netherlands and $121.8 billion in France.

"France is growing the fastest right now, with a 99 percent compound annual growth rate, but the reason is because it's smaller than the others right now," said Petra Gartzen, an analyst with Gartner. "But Germany and the U.K. alone will account for over 50 percent of European e-commerce revenue in 2004."

"In those two countries, buyers are forcing their suppliers to adopt e-commerce," Gartzen said. "Large multinational companies, such as the auto industry, are driving e-procurement in Germany. However, Germany also consists of a lot of small to medium companies, which are slower to adapt. The first (business-to-business) transactions in that sector will probably take place next year."

The main factors driving the high growth rate of the Internet economy across Europe will be deregulation in the telecommunications industry, increased numbers of mobile devices, political stability and increased venture capital, said William Nuti, president of Europe, Middle East and Africa for Cisco Systems Inc., the company that commissioned the study.

"Venture capital investment has been rising dramatically in Europe. In the U.S., it is not growing nearly as fast," Nuti said.

However, as the numbers show, e-commerce still makes up the largest amount of revenue in the Internet economy.

"E-commerce is the largest, and business-to-consumer is the largest portion of that," Gartzen said. "Business-to-business takes longer, because its about changing the way an entire industry works and the way they relate with each other. B2B is an evolution, it is not going to be a revolution. Business will still be about building personal relationships."

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