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The secret? American portals knew immediately how to use the big name they had acquired at home and make it work for them in Europe. But partnerships were also a huge help. Upon its arrival in 1996, Yahoo, for example, created a joint venture with the American publisher Ziff-Davis, present in 10 European countries. AOL, which entered the German and British markets in 1995, created a subsidiary that it shared 50-50 with the fifth-largest media group in the world, Bertelsmann. "Partnerships open doors to local financing, give a knowledge of the local market, and provide local management," says Jensuwe Intalt, financial director for Lycos Europe. BIG SETBACK. But although American portals have come through in Europe with flying colors, the same can hardly be said for e-commerce sites. Apart from problems related to lower Internet penetration, less credit-card use, language barriers, and higher taxes, the cost for setting up an e-commerce business is three times greater in Europe than in the U.S., according to Apax Partners. That's a big setback given the growth forecasts for the Internet and online business-to-consumer market in Europe. Therese Torris, an analyst at Forrester Research, also points out that portals didn't face a huge challenge in Europe, whereas "internationalizing a commercial site is more difficult: You have to become a part of the local industry, create contacts with suppliers, and negotiate prices. Of the 40 biggest e-commerce sites in America, less than a third are present in Europe, and of those, many are present only in one European market." American e-commerce sites are sure to miss out if they don't make more ambitious moves in Europe. Barry Parr and Maureen McManus from IDC warn that Americans need to be more aggressive internationally. They point out that Internet growth in Europe will be much stronger than in the U.S., stating in a study that the number of Web users in Europe is expected to double from 1999 to 2003, to 215 million, surpassing the 197 million in the U.S. Online B2C will also increase tenfold in Europe, to $38 million in 2003, whereas it will only quintuple in the U.S., to $114 million. Europe is also ahead in mobile Internet technologies and interactive television, making it a very rich market for the future. DAMPENED HOPES. But U.S. Internet companies are missing the boat in Europe. Parr and McManus found that American Web companies generate from 0% to a 10% maximum of their sales outside of their domestic markets. Added to that, says Daniel Scolan, marketing director at @viso, a Vivendi-Softbank joint venture that helps American Net startups move into Europe, are dampened hopes following the crash of high-tech shares last April. "Now they are going more progressively," Scolan says. Indeed, the evidence is disappointing. Although the one-year-old @viso participated in last spring's European launch of E-Loan, America's No. 1 online loan service, many other projects have since been halted. In August, @viso had to give up on preparing for the arrival in Europe of online supermarket chain buy.com. Various others -- such as eToys.com, garden.com, drugstore.com, software e-commerce site Egghead.com, and computer-materials site Outpost.com -- also didn't make it across the Atlantic. In other important sectors like travel and online-brokerage services, giants like Travelocity and Expedia on the one hand and Charles Schwab and E*Trade on the other haven't ventured beyond Britain. Some e-commerce sites, however, have been more successful in Europe. Following its 1998 purchase of European online booksellers Telebuch.de in Germany and Bookpages.co.uk in Britain, Amazon.com has today become the leader in those markets. Its sales are five times higher than those of rival Bol.com, which is owned by Bertelsmann and has a presence in 14 countries. Amazon was also launched in France last month. However, having failed in its effort to buy Alapage, which ended up falling into France Telecom's hands, Amazon will have to build from scratch in France. Commenting on the arrival of Amazon, Jean-Christophe Hermann, CEO of Fnac.com, the online version of France's giant book and music retail chain, says, "Our offer is broader and our relationship with publishers has been going on longer and is closer." "MONOPOLISTIC TENDENCIES." Other giants like eBay may see trouble ahead. Although the online-auction company holds 50% of the German market, thanks to its purchase of Alando, it remains behind British online-auction leader QXL, with only 30% of market share compared with 45% for QXL. And in France, where the local iBazar online auction controls 65% of the market, eBay is sure to hit some obstacles. André Haddad, vice-president of iBazar, warns that "this sector has monopolistic tendencies, since sellers want to be exposed to the largest number of buyers, and buyers want the biggest selection they can get. The advantage for the first market player, is, therefore, a determining factor." American e-commerce sites will have a lot of work to do in countries like France. "The Americans preferred Germany and the U.K. over France, which was a small market in 1996," says Olivier Beauvillain, analyst of the French market for Internet-research group Jupiter. "This way, they gave French Internet entrepreneurs a few years to get organized and are surprised by the incredible catching up the French did in terms of the Internet." But very few European e-commerce sites have gone Pan-European, and consolidation is only now beginning. Americans may well begin an acquisition spree and quickly make a place for themselves in Europe. If they wait any longer, it could be a costly mistake. By Gaellë Macke Translated by Inka Resch |
