Electronic commerce traverses national boundaries. Anybody, anywhere in the world can compete on an equal footing on the internet. Right? Not quite, says Richard Jones, founder of FortuneCity.com, who has just moved his company's headquarters from London to New York.
A one-year-old community website offering everything from free email to topical discussion groups, FortuneCity has grown rapidly to rank 31st in the world in terms of Internet traffic, according to September figures from Media Metrix, an Internet market research group. FortuneCity was the only non-US web site in the top 200 until it moved.
Why uproot a thriving business? To be closer to sources of venture capital funding and in on the latest Internet buzz all played a part, says Jones, but the move really arose from more basic issues. The high-capacity leased telephone lines linking his website to the Internet were almost twice as expensive in Britain and hard to get. Finding people experienced in running a "server farm" of 100 or so computers was nearly impossible in London.
Forming transatlantic partnerships with US companies was also proving difficult, says Jones. "People dismiss you as a UK company. There is a perception that you cannot be that good or that successful if you are based in the UK, because the US dominates the e-commerce market globally."
FortuneCity's story shows the disadvantages faced by non-US ventures as they attempt to make headway in e-commerce. In particular, higher telecoms costs are a killer. British costs are lower than those in some other parts of Europe, but they are still considerably higher than in the US. This hangover from the bad old days of regulated telecoms is a serious barrier for aspiring European e-commerce ventures. No wonder there is a shortage of experienced web site engineers and a perception that e-commerce is dominated by the US.
If this situation persists, Europe may be doomed to be a backwater in e-commerce.