It’s evident that over the last 15 years or so the Internet has completely transformed the way we lead our lives, but how has it affected our economies? This question has been looked at in several studies and articles over the years, but one conducted recently by BCG provided some perspective on just how far some G20 nations have come on this and how much further others ( yes you know I’m going to say France) still need to go. You can view the full report here and the Economist’s highlight from the study here.
There were loads of interesting bits of info in the report, but there were a few that were particularly compelling:
How little the internet contributes to France’s economy and how little it is projected to contribute in the future.
If this is correct, in France the Internet contributed ~3% GDP in 2010 and is projected to hit about 3.4% in 2016. This is vs an EU average of 3.8% and 5.6% respectively. Now, I don’t pretend to be an economist and I know that economies differ in terms of their structure, but that seems to me to be way too low, particularly vs the EU average. This is regardless of the fact that French consumers claim to have an extremely ‘high perceived value’ of the internet. Online retailing is a big input to these types of analyses and we know that France was bit late to the game on this front, but has gained a lot of ground in recent years. This is in stark contrast to the UK, for example, where e-commerce is king and the internet accounts for the highest contribution to the economy in the world (one could argue that this may be too high). In the case of France though, it seems something else is going on that is driving our internet economy’s underdevelopment. Perhaps it is partly due to…
France’s moderate-to-low ‘e-intensity index’.
There are three factors that are used in the study to assess whether a country has a high, moderate or low ‘e-intensity’: enablement (a measure of internet infrastructure), expenditure (a measure of spending in online retail & online advertising), and engagement (a measure of internet involvement by businesses, govts, & consumers). Not surprisingly, the northern European countries and the UK came in very high on these criteria. France came in the the middle of the pack. We’re certainly performing more strongly than the bulk of other EU countries, but we still have a ways to go. As these three factors are key to creating a dynamic, digital economy, this certainly provides some context as to why we’re a bit behind.
Internet ‘high-web’ SMEs generate more job growth than SMEs those that don’t.
This would intuitively make sense, but it’s good to see some confirmation of this. These type of companies also have significantly faster revenue growth. Companies classified as high-web SMEs are those that “use a wide range of internet tools to market, sell to & support customers, interact with suppliers, and empower employees”. Although this definition would technically include more than pure than tech companies, I think its a safe bet that tech startups would, by default, fall into the ‘high-web’ category.
Obviously France has embraced the internet enough to have established itself as an important internet/technology market. We saw a couple weeks ago that perhaps all the efforts in recent years to build France’s startup ecosystem are starting to bear fruit. However, it’s clear that there’s still a lot of work to be done. It’s evident that SMEs that are internet saavy or focused are stronger job creators than those that are not. Given that chomage (unemployment) has been one of the French public’s most pressing concerns in recent years, encouraging the growth of tech-oriented startups/SMEs should be one of the top priorities for the French government. It’s strange that we didn’t hear much as we would’ve expected about this during the presidential campaign (point which was also highlighted by a consortium of key associations in the tech sector last month). Looks like we’ll have to and see which policies in regards to startups and the digital economy the winner actually executes. However, I think this demonstrates that many of the current and planned incentives (e.g. tax incentives**, more attractive tax policies, financial support of research and innovation, etc) are, on balance, money well spent.
**Btw, in my post last week on France’s games sector Nicolas Gaume from SNJV mentioned the crédit impot de jeu vidéo. Apparently the crédit impot was under review by the European Commission as it was thought to disadvantage game companies in other EU countries that did not have a similar incentive. The threat to eliminate it actually caused a couple leaders in the sector (Quantic Dream and Ubisoft) to threaten to move some of activities to Canada. Well, the Commission prudently decided to allow it to be maintained. It will be in place until 2017 and has a budget of 45M€/year.