The Internet has become so ubiquitous in everyday life that its full impact on the economy is difficult to quantify. Such a valuation process is important to expose the Internet’s essential contribution to be made to economic growth in the coming years.
The Internet Association (“IA”) studies the economic value of the Internet in 2015, claiming that such a value has previously been conservatively estimated. IA identifies Internet industry activities and compares their total valuation to other major national industries using US Census information. In reality, IA remains conservative in their estimation approach by only taking in to account in their findings those industries that rely directly and substantially on the internet. Such industries include data processing, hosting and related services, wired and wireless telecommunications carriers, all Other Telecommunications, and Internet publishing and broadcasting, amongst others. The study shows that the Internet sector in fact reaches far beyond what was previously measured.
The Internet has evolved into a major driver of growth in the US economy. More than 43% of the world’s population is reported to use the Internet, while in the US alone this figure is as high as 92% of the population. The number of Internet users in the US has increased by approximately 100 million people since 2006, and the US is now said to be the country hosting the 2nd highest number of users in the world (behind China). 9.6% of the world’s Internet users live in the US, while the US hosts only 4.5% of the world’s population. Of the 21 largest Internet companies in 2014, 13 are US based firms.
While the value added by the Internet sector to the US economy is well recognised as substantial, findings show that its true value surpasses that of many other major sectors. Internet industries were estimated to contribute 6% of real GDP in 2014, or $966 billion. In 2012, Internet industries’ nominal contribution to GDP was more than the contribution from construction, computer and electronic products, broadcasting and telecommunication, and accommodation and food services. Between 2007 and 2012, Internet industries increased by 110% in nominal value added to the economy. In comparison, health care and social assistance increased by 24.5% - the second highest industry increase in value-added between these years.
“[T]he Internet has developed into a major vector for growth in the U.S. economy that has eclipsed the performance of many other more established sectors.“
As Internet activity grows, employment follows suit. Between 2007 and 2012, the number of workers employed directly by Internet sector companies grew by 108%, or equivalently at 16% CAGR. The Internet sector’s share of total US employment grew by 113%: from 1% in 2007 to 2% in 2012. This is over seven times that of the second highest increase in total employment share in the healthcare and social assistance sector. Moreover, many other industries have experienced declines in direct employment, including construction, transportation and warehouseing, and finance and insurance. This higher employment is accompanied by wages substantially above the average. Total employee earnings in Internet industries more than doubled from 2007 to 2012. Earnings as a share of the US total increased by 90% over this time: from 1.4% to 2.7%.
This quantification of the Internet’s value serves to illustrate its direct and indirect benefits to the US economy. This value added far surpasses all other major industries in terms of its contribution to GDP, employment creation and employment compensation. These results are much higher than those previously measured, and as such should be seriously considered policy makers wishing to utilise the Internet to realise future economic growth.