Strange as it might sound, given all the buzz about the digital economy, few concrete numbers exist measuring the Internet’s economic impact. The scarcity of hard data has allowed many to portray the Internet (at worst) as a negative force, destroying jobs, or (at best) as marginal to a country’s economic success.
In the past year Google has worked with a variety of partners to begin filling in this data gap. The Boston Consulting Group researched a series of country-specific reports. The first found that the digital economy accounts for more than seven percent of GDP in the UK
. BCG, McKinsey, and Deloitte followed up by analyzing the impact of the Internet on local economies for instance in France
, Czech Republic
, Hong Kong
BCG partners David Dean and Paul Zwillenberg recently were in Brussels to present a new study - not commissioned by Google - called Turning Local: From Madrid to Moscow, the Internet is Going Native
. It builds on the previous country reports, and adds additional BCG research, to describes the Internet's impact on 50 economies around the globe. BCG drew up an e-Intensity IndexTM which measures countries' Internet infrastructure, the amount of online expenditure and how enthusiastically businesses, consumers and governments engage with new technologies. By 2015, BCG projects, the Internet will contribute 7.3 percent of Danish GDP. Other countries will experience even bigger jumps during the next years. By 2015, the Internet will account for four percent of Spanish GDP, almost double 2009’s figure of 2.2 percent.
If anything, these GDP measures may underestimate the Internet’s true impact—something BCG, McKinsey and Deloitte all acknowledge. For example, in many countries between five and 10 percent of retail sales are researched online before the consumer makes an informed purchase in a physical store, and the cost savings from shopping on the web can be substantial, amounting to almost £1,000 per household in the UK. Similarly, consumers benefit from using free, advertising supported services like email that they would otherwise have to pay to enjoy. McKinsey and IAB Europe
found consumers enjoy €100 billion in consumer surplus—almost three times the revenue online advertising companies receive—none of which traditional GDP measures captures.
Earlier this year, McKinsey specifically researched the externalities around Internet search, with collaboration and support from Google. Their independent report, Impact of Internet Technologies: Search
, states that search technologies—including but not limited to Google—create over $780 billion of value for the global economy, of which only four percent accrues to the search engines themselves.
Google and other members of the Business and Industry Advisory Committee BIAC
last month participated in an expert roundtable at the OECD
exploring current and future methods for measuring the impact of the Internet on the global economy. The roundtable will be followed by a report sponsored by Google that will measure the impact of the Internet on OECD member countries.
For BCG, their studies represent only a first step. The goal is to help jumpstart a global conversation on the economic value of the Internet. In Brussels, Dean and Zwillenberg were clear in presentations made to European think tank Bruegel
(of which Google is a member) that SME’s are one of the biggest groups of beneficiaries in Europe. Their research, which included a survey of over 9,000 companies, concludes that businesses using the web intensively grow significantly faster than businesses that don't. That’s a theme that we, and BCG, will be revisiting in coming weeks and months.
Posted by Patricia Wruuck, Policy Analyst and Betsy Masiello, Policy Manager