Dot-Com Profits Good News For Europe's Hosting Market

• By The WHIR, September 26, 2001

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Dot-Com Profits Good News For Europe's Hosting Market Adam Eisner, theWHIR.com

September 26, 2001 - Although many companies and analysts have slammed Europe's Internet market for being slower and smaller than North America's, it would appear that Europe is now getting the last laugh.

According to a new report from research and consulting firm PricewaterhouseCoopers, European dot-coms are putting up an extremely good fight against poor market conditions.

The report, which is based on a survey of 400 European Internet businesses, found that 90 per cent of dot-coms surveyed one year ago were still in business today. Of these businesses, a surprising number have already turned profitable, which bodes well for a business sector that has been under heavy fire the past year and a half because of its poor performance.

In Germany, 66 per cent of the firms queried said they were now turning a profit. The Netherlands followed with a solid 61 percent of companies hitting profitability, followed by France, where 49 per cent of firms were making money. Perhaps the only letdown was the UK, which is often considered to be a tech hotbed and the first point of expansion for many North American firms, where only 24 per cent of those surveyed reported making a profit.

Based on these numbers, it would appear that European Internet businesses are taking a cue from their North American counterparts, whose laissez-faire attitude to business on the Internet has led to the demise of numerous companies over the past two years. Most of the managers surveyed said they were taking a no-nonsense approach to the operation of their businesses, with cost-cutting, improved product quality and intense marketing efforts high on their priority list. Hiring new employees was a non-issue for most companies, and 24 per cent said they had altered their original business model to better suit their company for profitability.

"There used to be a tendency among some dot-coms to see them as a breed apart and subject to a different set of business rules," said Nick Drewett, director of PricewaterhouseCoopers, in a related report. "We have seen a fundamental change in the attitudes of the CEOs running European dot-coms, as they are now prioritizing areas such as cost-cutting, profitability and acquiring and retaining customers above creativity and risk-taking."

All of this is obviously good news for European Web hosting companies, as more profits ultimately result in a bigger market of potential customers. When the dot-com market shrinks, so do many hosting firms - as demonstrated by the recent demise of Exodus Communications, who is now reportedly preparing to file for Chapter 11. Exodus was hit extremely hard when the Internet bubble burst, but it wasn't the only one: most North American hosting firms have been forced to cut costs in one way or another, and some have even seen some of their managed service clients downgrade their packages to low-end solutions while markets continue to flounder.

Armed with the advantages of retrospect and a still-emerging market, European hosting firms should put careful consideration in to choosing a target sector when marketing their services. PWC's report would seem to indicate the future is bright for Europe's managed hosting providers - after all, most e-businesses require a high-end Web hosting solution - but the study also mentions that most growth was in dot-coms focusing on the B2C sector rather than the much-heralded B2B area.

It's also important to remember that despite the fact that PWC's report speaks of profits, European companies are not immune to adverse market conditions. This means many managers of European firms will be apt to put a strong emphasis on financial efficiency, and will be seeking the most 'bang for their buck' when choosing a hosting provider.

While it would appear further opportunities are emerging for Web hosting companies in Europe, controlled growth will still be key - Europe's Web hosting industry will not want to get ahead of itself like North America's did. After all, like the old saying goes: slow and steady wins the race.

    

Tags:  Europe  managed hosting  Appro  ETT 

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