The development of e-commerce across the globe varies widely depending on factors such as an area's technological infrastructure; the technological expertise of residents, which is related to both the ability of e-commerce companies to find qualified workers and the ability of citizens to engage in Internet-related transactions; funding available for e-commerce ventures; and national, regional, and local commerce regulations. In the late 1990s, e-commerce grew most quickly in North America, particularly in the U.S., due to the increasing number of Internet savvy shoppers there, as well as the world's largest base of technical experts, who not only were available to work for e-commerce ventures, but also launched their own firms in many cases. Also fueling the U.S. e-commerce boom was the unprecedented level of venture capital available from a variety of sources.
E-commerce grew more slowly in Europe for a variety of reasons. In general, Europeans proved more skeptical regarding the potential of e-commerce ventures, which meant funding was more difficult for up-starts to obtain. E-commerce players also faced many more regulatory hurdles than in the U.S. as online commerce laws varied widely across the different countries within Europe, a fact that not only dissuaded some traditional European firms from engaging in e-commerce, but also slowed the European expansion of some worldwide e-commerce giants. In addition, interactive information services, such as teletext television, also enjoyed more prominence in Europe, which undermined the novelty of the Internet for many Europeans. Perhaps one of the largest obstacles to Internet use in Europe was the cost of local phone access, which was billed by most major telecommunications firms there on a per-minute basis. Since local telephone lines provided the most common form of access to the Internet, users were forced to pay not only monthly fees to their Internet services provider (ISP), but also per-minute fees for the call as well.
However, Internet access across the continent did begin to increase in 1999, due in large part to the free Internet access offered by firms such as United Kingdom-based Freeserve, launched by European electronic retailing giant Dixons Group in September of 1998. While Internet users were still required to pay the local telephone call charges incurred while using the Internet, Freeserve did not charge any sort of premium or monthly subscription fee. The roughly $20 per month these free ISPs saved most European Internet surfers was enough to entice hordes of new users to sign up for service. In fact, roughly 16 million Europeans began using the Internet for the first time in 1999. As a result, the percentage of Europeans with Internet access grew to 13 percent. Venture capital became increasingly available that year as well. For example, French venture capitalist Bernard Amault established Europ@web, an online startup fund worth 500 million euros. French conglomerate Vivendi partnered with the Internet investment unit of Softbank, a Japanese publishing group, to form @Viso; the new venture received $100 million to expand CarPoint, Onsale, and the other U.S.-based online operations owned by Softbank into Europe. In addition, established funding firms such as 3i, Atlas Ventures, and Net Partners also began investing in European dot.com.
In 1999, the number of European businesses using the Internet for sales, marketing, and other business-to-consumer (B2C) efforts grew from 53 percent to 72 percent, while the number of European firms using the Internet to conduct business-to-business (B2B) transactions, such as procurement, reached 47 percent. Despite this growth, however, e-commerce sales in Europe, which totaled $18 billion, lagged far behind the $507 billion in e-commerce sales transacted in the U.S. Europe held only a 14 percent stake of the worldwide B2B e-commerce market, compared to the 67 percent stake held by the U.S., and a only 14 percent stake of the worldwide B2C market, compared to 76 percent in the U.S.
Internet usage rates among Europeans continued climbing in 2000, as the number of European homes with Internet access jumped by 55 percent between March and October. In fact, the number of Internet users in Europe exceeded the number of U.S. Internet users for the first time. Fueling this growth was the deregulation of the European telecommunications industry, which finally forced some local phone monopolies to give local phone line access to ISPs wanting to offer unlimited Internet access for a set monthly fee, as was the norm in the U.S. For example, Freeserve was able to offer unmetered Internet access for the first time in April of 2000.
In early 2001, despite their increased Internet usage, less than five percent of European Web surfers were making regular online purchases. Regardless of these disappointing numbers, however, some industry analysts believed Europe faced a better e-commerce future than the U.S. According to E-Commerce Times writer Michael Mahoney, "It may be taking Europeans longer than Americans to gravitate toward online shopping, but the numbers also mean that European dot-coms have not had so far to tumble. With European e-commerce averaging some 18 months or so behind that in the States, the U.S. dot-com shakeout has served as a highly visible business lesson for European e-tailers—helping to prevent them from making the same mistakes." In fact, a Pricewaterhouse-Coopers study released in September of 2001 revealed that 90 percent of the 400 European Internet companies it surveyed in July of 2000 were still afloat one year later, despite many predictions otherwise. Many of the firms even achieved profitability due, in part, to cost cutting efforts and the ability to alter business models based on market conditions.
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