The adoption of new media by business has soared ahead in the last year, but budgets are sharply lower. That is the headline news in this opening article of business.eu, which is launched today as a regular monthly service by Online Research Agency and FT-IT.

Business.eu studies European business activity on the internet and within new media, covering everything from public websites, intranets and extranets to mobile, broadband and other convergent technologies.

Based on a pioneering study last year by us at Online Research Agency and Patrick Barwise, professor of management and marketing and chairman of the Future Media Research Programme at London Business School, the business.eu reports will build a picture of the changes in new media usage and the ways these technologies develop for businesses over the coming year.

Business.eu is based on questioning a panel of heads of internet at European companies about their companies' new media activities. The members are not paid - their reward is access to the results of the surveys. The data are a useful compass by which to navigate the fast-changing waters of internet and new media.

The respondents vary from survey to survey, but of those who replied to this survey, 19 per cent work for enterprises with European sales of more than £500m .

Since summer 2000, European understanding and use of the internet has grown to match that of the US, and the early mover advantage of US businesses has began to disappear. Usage of intranets and extranets has increased sharply - for intranets it is up four fold since 1999 across Europe and for extranets by as much as 10 fold.

Another change has been the transfer in the formal responsibility for internet activities. In 2000 it was largely the marketing or PR departments of companies (49 per cent corporate communications/PR, 33 per cent marketing/sales) that controlled internet policy and spend, but there is now often a new breed of e-commerce manager or director.

Among our respondents, recruited because they have formal responsibility for new media, 21 per cent are e-commerce or new media managers or directors, 18 per cent are IT directors or managers, and 9 per cent are webmasters.

Our results show that e-commerce is still growing strongly (from a low base) with revenue growth rates of 10 per cent a month or more still widely reported. Intranets and extranets are currently fashionable although they are widely perceived to be cost saving rather than revenue generating measures.

Most of the business.eu surveys are aimed at establishing what is happening now and what will happen in the immediate future - the next 6-12 months - still a long time in internet terms.

The panel members are drawn from some of the 2,400 largest companies in Europe (measured by Dun and Bradstreet report of their turnover), and supplemented by internet strategists from ISPs, pure web operations and smaller companies.

They are first telephoned to ensure they meet the criteria of being the functional head of internet or new media for their company.

Then they answer questions via e-mail or a web-based questionnaire.

In southern Europe, there is acultural reluctance to join panels, so the survey results are based largely on what is happening in northern Europe (where the internet is, in many respects, more developed).

The majority are drawn from the UK, France, Germany, the Netherlands, and the Nordic countries - Sweden, Denmark, Norway, Finland. German respondents tend to be the most secretive, especially about budgets.

The study tracks the strategies businesses use to harness the internet and new media in Europe, and the technologies that are employed. Who takes management responsibility for online activities? What kind of budgets do they have and how quickly are these expanding? Apart from the ubiquitous website, are company intranets and extranets making a real difference?

The answers to these and a myriad other questions are useful for companies IT policy makers trying to benchmark themselves against their competitors.

The first results from business.eu established what was considered best practice in website management. A year ago, sites were already tending to use redundant server architecture and hierarchical infrastructure to make their networks more reliable. Later articles will establish whether this trend has intensified.

The ASP model (where companies outsource their use of certain technologies) has not yet had the expected take-up. The series will monitor the use of outsourcing in online activities, starting with web hosting and bandwidth.

Budgets will also be studied closely. Website design is an extremely cost sensitive area, and budgets for websites are still relatively low. This reflects the state of the new media sector, despite a sharp increase in intranet and extranet usage.

We asked respondents for their expected total spend excluding marketing the site (e.g. PR or buying banners). Half of businesses expect their website/intranet/extranet development budget to total under £100,000 in the next 12 months, including design, hardware, software, programming and bandwidth.

In 2000 only 56 per cent were budgeting under £250,000. The slowdown is happening across the board as the proportion budgeting more than £3m has fallen from 6 per cent to 2 per cent.

Nearly half of businesses with an e-commerce function report that their e-commerce revenues generate less than £25,000 per month. Six per cent have revenues exceeding £1m per month.

Among those with e-commerce, e-commerce revenue growth is generally running at up to 10 per cent per month. Only 4 per cent report no growth. None of the internet heads surveyed report a decline in e-commerce revenues.

The results below are some of the other main business.eu findings.

Internet heads reporting on the short-term improvements they are planning for their sites focused on adding functionality or a new website or section and improving user tracking and analysis. One in three are looking to set up or develop an intranet. There is little evidence that medium-term priorities are very different.

Just over a third (36 per cent) of websites have an e-commerce function. Of these, it is usual for most inventory to be available from a public website. This compared to 21 per cent in 2000.

Two thirds (68 per cent) of businesses surveyed have an intranet. This compares to just 6 per cent in 1999, using figures from NOP. The survey found that intranets are most commonly used as a noticeboard; for corporate communications; as an internal phone directory; or as an internal library/document resource.

Half of all businesses surveyed have adopted extranets, which are closed websites for clients or suppliers. Of those that have an extranet, half have more than one. Distributors, clients, and business partners are equally likely to be linked to an extranet. The main perceived benefit of an extranet is "better client service", while "speed of operations" and "cost reduction" are also important factors.

Companies are increasingly using outside web hosting service computers rather than having their servers and bandwidth provided to their own site. This trend towards co-location is set to continue.

Cable & Wireless is the only co-location/web hosting service that the majority of respondents have heard of. A quarter have heard of Redbus Interhouse, two-tenths have heard of Exodus. (More on this in the next instalment of business.eu, to be published in FT Telecoms on July 18.)

Online Research Agency www.online-agency.com is a specialist B2B internet market research company. The business.eu study is available by subscription (E795 quarterly or E2,350 annually). For more information please contact info@online-agency.com