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PricewaterhouseCoopers conducted a survey on Internet market trends and found that a widening gap between the most and least prosperous Internet companies is a major trend on the European Internet market.
According to Kevin Ellis from PricewaterhouseCoopers, this trend should have led to cost cutting at dot.coms in light of the string of bankruptcies and plummeting stock prices.
"But instead a typical Internet company has raised marketing and general expenses, making the overall amount of spending 150 percent of gross revenue," said Ellis.
Estonian companies have seemingly found the right niches.
"In Estonia, the share of business-to-consumer companies is very small, mostly because the country is small," said Allan Sombri, marketing director at the Delfi online portal.
One of the most advantageous features of Estonian Internet companies is that the local market has not seen the "bubble" period, when Internet-related companies were highly overestimated, Sombri said.
"One of the differences between an average European Internet company and Delfi is that our marketing expenses do not make up a significant part of our general expenses," Sombri said.
However, Delfi's advertising revenues are also smaller than companies' in Europe Ð less than 20 percent of total revenues.
In May 2000 PricewaterhouseCoopers and Fletcher Advisory developed an analysis of spending habits of some UK Internet sector companies and concluded that many were overspending.
Last September PricewaterhouseCoopers identified the top 150 publicly listed European Internet companies, most of them German, with a combined market capitalization of 200 billion euros ($183 billion). Elements like share price performance, spending habits, cash raised and cash usage were estimated in order to identify cross-border trends and sector trends.
The report showed early signs of a recovery in the Internet sector.
Fletcher Advisory also produced a report defining the two most and least successful types of Internet companies Ð the survivors and the strugglers.
The survivors' marketing expenses are nearly half of the strugglers' and they continue to move toward cheaper and more targeted marketing. The strugglers, or as Fletcher Advisory puts it "the opportunistic children of the net," operate mostly in areas with lower barriers to entry, where players need less experience to compete.
The survivors have long track records and often are companies that existed before the Internet appeared. Future trends, according to the survey, will put the survivors in an increasingly advantageous position.