eCommerce has overtaken communication as the driving force behind Web developments in Britain according to the UK Internet Survey 2000 by Fletcher Research, the UK Research Centre of Forrester Research. In 1999, the majority of companies (59%) were using the Web primarily to communicate with consumers, employees, and investors. Today, almost half of all sites are attempting to exploit the eCommerce opportunities afforded by the Web.

Fletcher’s report also asserts that the relative youth of the UK Internet means that large corporations are not necessarily disadvantaged by Web-based startups, and although competition is fierce, many big businesses are moving sufficiently quickly to secure online success.

Rebecca Ulph, senior analyst at Fletcher Research, comments, “Strong competition from FTSE 250 companies has not given stand-alone businesses an easy ride. If anything, UK corporations have put up strong competition to Web-based startups. For instance, Smile, backed by The Co-operative Bank, is one of the strongest brands in UK online financial services; the BBC has aggressively leveraged its offline brand in a portfolio of Web operations; and British Telecom has remained one of the UK’s largest ISPs in the face of aggressive competition from Freeserve.”

But the UK remains an attractive market for established US Web businesses. In many cases, UK services are being led by competitors that began life in the US, and at present, a great many stand-alone Web businesses operating in the UK are extensions of successful US businesses. Amazon, for example, controls over 50% of the UK online book retailing market. But as yet, UK-based startups have made little impact, and the UK market has only a small number of stand-alone Web businesses, such as Freeserve, First-e, and BOL, attempting to compete with bricks-and-mortar firms.

Ulph continues, “As UK Web businesses increasingly seek to capitalise on eCommerce and lock in customer loyalty, the quality of that customer experience is of paramount importance. Many sites have introduced interactive features — 85% now offer some sort of interactivity. Also the use of user-generated content has doubled as sites realise the advantages of fostering a community and with it, customer loyalty. Also, information on user behaviour is an increasingly valued commodity. Cookies and registration are increasingly being used to extract personal and behavioural information from users — 53% of sites have cookies, 43% employ some type of registration.”

The increased competition in the UK Internet economy is boosting investment in Web operations, and the cost of setting up and running Web companies is growing rapidly. It now costs around £1 million to set up a competitive commerce-enabled Web site, up over 100% from last year. Also, the cost of maintaining a Web operation in the UK is skyrocketing. The typical UK Web site is costing £590,000 a year to run, up almost 160% on last year, but in many cases, site traffic is not increasing in line with these increases in costs, which could indicate some misapplication of investment.

Ulph concludes, “Online commerce is soaking up more internal resources. Sites are employing more resources in development and maintenance. The number of internal staff involved is increasing, as is the level of outsourcing of day-to-day Web site management functions. Few sites run their entire Web operation in-house — just 11% of the companies claim not to outsource any aspects of the running of their Web site.”