Fact 10: Digital economy – France invests for the future
- A market overview
- Key sectors
- Ambitious funding
- Digital companies are attracted to France
“If you look at the size of the Internet economy in France, it is about 5.2% of GDP, which is not insignificant. It is about the same level as education, but more than agriculture and energy. It’s starting to be significant” Matthieu Pélissié du Rausas, a senior McKinsey partner in Paris.
France has the third-largest ICT sector in Europe (source: European Information Technology Observatory, 2010).
A quarter of the country’s economic growth and 16% of productive investments were attributed to digital development in 2010 (source: Rexecode).
The digital economy accounts for 3.7% of French jobs, 5.2% of GDP and 7.9% of total private-sector value added and more than a quarter of private-sector R&D activity (source: AFII).
Over the past 15 years, the Internet created a net 700,000 jobs or 2.4 jobs for every one destroyed.
By 2015, 450,000 more jobs are expected to be created, creating €130 billion in value added, or 5.5% of France’s GDP.
The impact of the Internet goes beyond GDP. The consumer surplus generated by the Internet in 2009 was €7 billion ($10 billion) in France.
McKinsey report – Impact of the internet on the French economy, 2011: “[..] the country is moving forward with clear strengths. It has a strong user base, solid infrastructure, and quality maths and science education. It is also one of the countries where Internet contribution is growing the most.”
In McKinsey’s top 250 Internet-related firms database, there are many French firms: Alcatel-Lucent, Cap Gemini S.A., Atos Origin S.A., Dassault Systemes SA, France Telecom, Gemato, Group Bull SA, Groupe Steria SCA, Illad SA, Vivendi (source: 2011 McKinsey report – Impact of the internet on the French economy).
In France, the digital economy is boosted by five innovation clusters:
- Cap Digital (Ile-de-France) for the creation of digital content and its multimedia distribution and exchange
- Images et réseaux (Brittany and the Pays-de-la-Loire region) for communications networks
- Minalogic (Rhône-Alpes region) for intelligent miniaturized products and solutions for industry
- Secure Communication Solution (Provence), for secure processing and communications solutions
- Systematic (Ile-de-France), for complex systems and generic software.
Companies get digitized: 86% pay the VAT online; 24% of the companies with more than 10 employees use a management information system; 13% sell online; 27% buy online (source: OCDE, Collectif Numérique, FEVAD, IAB, GFK, Datacentermap, Eurostat).
World-class telecommunications networks
France’s telecommunications networks are among the best in the world, with investments in cloud computing, 25% annual growth in e-commerce and five dedicated innovation clusters (Cap Digital, Images and Networks, Minalogic, SCS and Systematic) supporting development in this area. As at 30 September 2012 there were more than 73 million mobile phone contracts in France (source: Arcep).
With 130 exhibitors (Hall 5, Booths 5E100, 5G100 and 5I100), the French Pavilion was the biggest national pavilion at the Mobile World Congress in Barcelona, in 2013.
France is among the leading countries when it comes to high-speed Internet: it ranks second in the EU. According to OECD, the high-speed Internet penetration rate in France was 35.9% in 2011.
High-speed Internet penetration rates
In the third quarter of 2011, there were 22.4 million high-speed or very high-speed Internet connections, including 20.7 million ADSL subscriptions. 1.6 million households got ultra-fast broadband at the end of 2012 (up 19% on last year) (source: Arcep).
A national incentive plan is being launched in 2013 to roll out very-high-speed Internet for every household by 2025, using the best regionally adapted technology.
E-commerce in France is booming
E-commerce in France accounts for 25% growth per year, €37.7 billion in revenue (€42.9 billion in remote selling), 66,000 jobs (full-time equivalents), 31 million online purchasers and 10% of the revenue of specialized companies (source: Fevad 2012).
The average online shopper bought $79 in groceries in 2008, compared with $33 in the United States. Pierre Kosciusko-Morizet set up the popular PriceMinister website, a rival to Amazon. The online designer brand retailer vente-privee.com, founded by Jacques-Antoine Granjon, has been an international hit.
France has built some of the most successful non-American start-ups like Deezer (a precursor of Spotify), Dailymotion (created before YouTube), Criteo and Ventesprivées.com. The finalists of the international start-ups competition organized by the Web’12 Conference in December 2012 were all French companies.
Cloud computing in France is growing fast
The French market was worth €1.85 billion in 2010, €672 million of which was generated by SMEs (source: Nexima estimates). 20% growth is expected between 2013 and 2015 (source: Xerfi forecasts). The French market will account for 8% of organizations’ information technology spending by 2015.
In 2011, the French government issued an initial call for projects dedicated to R&D in cloud computing, as part of its National Investment Programme. The French Federation of Software Publishers set up a website to simplify the procedure for project promoters, when submitting projects for funding within the National Investment Programme (www.investirdanslenumerique.fr).
The French market comprises 100 data centres, around 40 of which are located in the Paris region. Data centres of large French operators such as Orange France Telecom and Atos are developing in France and abroad.
Multinationals such as IBM, Interoute, Interxion, Telecity and Telehouse are making investments in the French market worth an estimated €1 billion per year. They are attracted by France’s renowned engineers and technicians, its secure and affordable electricity supply, and national legislation (the "Computing and Freedoms Act" and the legislation on data encryption, the "Confidence in the Digital Economy Act") ensuring optimal legal security requirements for data protection and data processing (source: excerpt from http://www.invest-in-france.org/us/news/data-centers-a-major-engine-behind-france-s-growing-digital-economy.html)
French video game industry is the second-largest European market
France is home to internationally renowned companies Vivendi (the largest publisher in the world), Ubisoft (third-largest publisher in the world and Europe’s largest) and Big Ben Interactive (largest video game accessory distributor in Europe). This sector employs 5,000 people. France ranks second in the world for the number of video games made for Facebook.
The government has just signed an R&D agreement (called “Mango”) aimed at providing the basis for a new generation of video games. It involves 60 people working for Ubisoft, the Alternative Energies and Atomic Energy Commission and the National Centre for Scientific Research. The state will provide €3.5 million in funding.
France is the second-largest European market in this sector, with a turnover of €3.2 billion in 2011 (source: Ministry for Production Recovery).
The Greater Paris project: building a digital city
In October 2012, the French government unveiled a programme to set up world-class clusters for digital companies in Paris’ inner suburbs and its surrounding area and in major cities up and down the country. The goal is to bring together all the players in the digital sector both to stimulate its momentum and make international investors and entrepreneurs more aware of its talent.
An ambitious National Investment Programme
- €2 billion for Internet infrastructure (very high-speed mobile bandwidth, optical fibre and digital transmission by satellite), to cover the entire country by 2025.
- €2.25 billion to support innovative digital services, content and applications.
- €250 million to develop smart grids.
The Digital France Plan 2012-2020
57 new priority targets to develop the digital economy by 2020 have been set, including:
- Increasing digital uptake to 100% of companies in France, including very small companies
- Making all digital terrestrial channels high-definition, while developing interactivity and mobility, and launching at least one 3D channel
- Making administrative formalities paperless by 2020
Foreign companies established in the French market include Ad Ultima, Yahoo, Brightcove UK Ltd., Celum France, Intel, Glam Media, Neovini, Jovent, Microsoft, Peppercan, Google, Teamquest Corp., Wave Software, TurboHercules, 360 Innovation, Experian CheetahMail and eCairn France.
Google opened its new offices in Paris in December 2011 following an investment of €100 million.
Intel opened a specialized facility in Nice for wireless technologies.
The Smart Technologies group, one of the biggest experts in collaborative solutions, chose the Paris region for its Europe, Middle East and Africa office in 2008. In October 2011 the group announced it would be opening a facility in the Paris region to serve as the company’s new France headquarters.