Internet Gold Rush Grips Europe

A new surge of e-commerce investments in Europe will boost the number of regional Web start-ups, forcing traditional players to rethink their strategies — so says a new report from Cambridge, Massachusetts-based Forrester Research Inc.

In the past, a dearth of venture capital has hindered the development of e-commerce start-ups in Europe — allowing only the big players to dominate its e-commerce landscape. But, the report says, that’s all changing for the following reasons:

Things Are Heating Up

Venture capital is now pouring into the continent. For instance, French tycoon Bernard Amault last month announced the launch of Europ@web, a 500 million euro fund that will fund online start-ups. In addition, other venture capital firms such as 3i, Atlas Ventures and Net Partners are pumping capital into Europe. Recently, even France Telecom invested $10 million (US$) into lastminute.com.

IPOs are sparking Internet stock mania in Europe. The Internet IPO arena is heating up in Europe — with several companies debuting on public markets from the Nasdaq to the Nouveau Marche’. For example, Dixon’s Freeserve, the U.K.’s free Internet access service, soared nearly 40 percent after debuting on exchanges in London and New York. Also, U.K. auction site The eXchange and auction site QXL valued at $1.2 billion out of the box.

Finally, media giants are rushing into joint ventures. Last month, the Internet investment arm of Japanese publisher Softbank entered a partnership with Rupert Murdoch’s News Corp. to launch eVentures, and with French conglomerate Vivendi to create @Viso. Both companies will receive initial funding of $100 million in cash to bring Softbank’s US online properties such as CarPoint and Onsale to the U.K., Germany, France, Italy and Spain.

A Wake Up Call

Forrester’s report concludes that sudden infusion of venture capital into Europe’s e-commerce sector will send out a loud wake up call to such staid European giants as BBC and Gruner & Jahr. These companies have been like turtles when it comes to getting into e-commerce.

But while they wipe the sleep from their eyes, the flow of money will encourage European entrepreneurs to rush into retail categories that thrive Stateside. The report predicts that online pharmacies and car dealerships will soon also become a European staple.

Yanks Are Coming

Such frantic growth among regional players is bound to attract the attention of US dot-coms, according to the report. This will spur US players to aggressively ratchet up their foray into European territory so they can plant their corporate flags into Old World soil. Europeans can expect an invasion from players such as drugstore.com to Ask Jeeves. This will raise customer expectations — helping Europe to move up the e-commerce curve.

But whether or not European corporations will just sit on their hands as the upstart Americans invade their virtual space remains to be seen. Perhaps they’ll decide to launch their own counter invasion on U.S. e-commerce territory. But no matter which way it plays out, one thing is certain: consumers throughout the world will win.

What do you think? Let’s talk about it.