Thursday, 8 November 2007

Europe's north-south web divide

From The Times:

November 7, 2007

Europe's north-south web divide

While web penetration rates are racing ahead in northern Europe, in Portugal and Italy web use is barely growing

Bernhard Warner

The latest headline data on the progress of wired Europe is promising. Across the continent, internet penetration rates are still growing at a healthy clip, an encouraging sign that Europe’s overall economy remains innovative and competitive, and that the tech industry here will be operating in a dynamic market.

According to the web measurement firm comScore, the internet population of the 16 countries that comprise its European region grew by 5 per cent to 226.7 million in the year until September. Russia was top of the heap, growing at 23 per cent to 14.6 million. Spain, Ireland and France grew by a healthy 18 per cent, 16 per cent and 14 per cent, respectively, comScore reported on Wednesday. Britain, Europe’s second largest online population, grew by 9 per cent year-on-year to 32.2 million, closing the gap on Germany, Europe’s largest market.

Bob Ivins, comScore’s executive vice president of international markets, says Europe as a whole is still growing robustly. “Given the relatively low internet penetration in several major European countries, there is plenty of upside in the European market.” Russia, where just 12 per cent of the population is online, “appears poised for substantial growth.”

That’s the good news.

At the bottom end of the spectrum lie Italy, where I am presently tapping away, and Portugal. According to comScore’s latest measurements, net growth is sputtering in Italy at one per cent in the last year and it has ground to a halt in Portugal.

A more worrying statistic is that Italy and Portugal have hit this apparent wall in net usage far below what can conceivably be called a country’s online maturation point. For Portugal, comScore records just 43 per cent of the population above the age of 15 having accessed the internet from home or work in September. In Italy it is worse. Just 35 per cent of Italians in the same age bracket went online in September, comScore says.

Is this a passing blip of relatively inactivity, or has net growth all but ceased in Italy and Portugal?

Mr Ivins is quick to say that it’s too early to conclude that for these two Western European countries, one a member of the G8, the days of growth are over.

To be sure, at some point in the next few years online growth rates will begin to fall, and, eventually, plateau, in the whole of the developing world. For example, in the Netherlands, 82 per cent of the adult population is online, says comScore, and that’s not likely to go up that much more. The same can be said of the Nordic countries. Sweden, Denmark and Norway have online penetration rates in the low-70s.

So, taking a glass-half-full look at Italy and Portugal, it’s safe to say that these two countries are still far from their maturation point. They should have years of natural growth left. At this point, however, it looks depressingly dead.

Mr Ivins suggests that Italy and Portugal will never catch up with their neighbours to the north. The infrastructure, demographics, cultural differences and, I’d add, the economic outlook will mean a smaller percentage of Italians are online at any given moment than say, the Swedes or Dutch or Germans – or anybody in Europe for that matter.

A number of factors explain a country’s online dynamism. Whether the country is relatively competitive in terms of the number of broadband providers, whether there has been a reasonable level of investment in bringing net access to the masses and whether people have the money to spend on such services are three of the biggest.

I can’t speak with much authority on Portugal, but I can say that here in Italy, by these measures, the future looks dim. Italian economic growth this year will be roughly 1.8 per cent, the Economist Intelligence Unit estimates, a shade higher than the comScore online growth rate. The reason GDP growth is probably higher than online growth is that Italy has such a large population of pensioners. They will continue to spend money on the bread, milk and pasta, but certainly won’t be browsing on eBay or clicking on online adverts or doing any of things that boost the online economy.

If you take Italy and Portugal out of the equation, the future of Europe’s tech and web economies is looking fine. Not a comforting thought from where I sit.

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