WASHINGTON – Interactive advertising is responsible for $300 billion of economic activity in the U.S., according to a new study released by the Interactive Advertising Bureau (IAB). The advertising-supported Internet represents 2.1% of the total U.S. gross domestic product (GDP). It directly employs more than 1.2 million Americans with above-average wages in jobs that did not exist two decades ago, and another 1.9 million people work to support those with directly Internet-related jobs. A total of 3.1 million Americans are employed thanks to the interactive ecosystem. These are the key findings of the first-ever research to analyze the economic importance, as well as the social benefits, of the Internet.
The study, commissioned by the IAB was produced by Harvard Business School professors John Deighton and John Quelch, along with Cambridge, MA-based Hamilton Consultants. The study was designed to provide an impartial and comprehensive review of the entire Internet economy and answer questions about its size, what comprises it, and the economic and social benefits Americans derive from it.
“This is the first time anyone has undertaken a comprehensive analysis of the size and scope of the Internet economy and measurement of its economic and social benefits,” said Professor Deighton, the Harold M. Brierley Professor of Business Administration at Harvard Business School, and an author of the study. “I am convinced the results of this study will prove useful for business leaders, legislators and the educational community.”
“This study underscores that the Internet ecosystem is generating an increasing level of economic activity in every corner of the nation,” said Professor Quelch, the Lincoln Filene Professor of Business Administration at Harvard Business School and a co-author of the study.
The study looks at the entire interactive marketing ecosystem, which includes:
* The ad-supported Internet, narrowly defined as the content and usage supported by an estimated $23.4 billion of Internet advertising in 2008
* E-mail, the cornerstone of lead generation and customer care for many companies
* Enterprise websites, the Web sites that businesses, large and small, develop and maintain for communication.
Among some of the other important findings:
* Small businesses have thrived as a result of the Internet:
o There are more than 20,000 Internet-related small businesses in the U.S. that provide a variety of services such as web hosting, ISP services, web design, publishing, and Internet-based software consulting. Many of these businesses have 10 or fewer employees.
* Internet-related employment is particularly important to certain areas of the country but exists in every one of the 435 U.S. Congressional Districts. Some Congressional Districts have more than 6,000 Internet-related employees.
* Interactive advertising has substantially reduced what consumers have to pay for access to the Internet and for e-commerce products and services. In addition to its financial contribution to the U.S. economy, the Internet has produced large social consequences as an infrastructure and platform, providing American society comprehensive qualitative benefits that include:
o Universal access to an almost unlimited source of information
o Increased productivity (output per unit of capital or labor, or increased consumer utility at a lower cost)
o Innovation in business practices, consumer behavior, commerce and media
o Empowerment of entrepreneurs to start small businesses, find customers and grow
o Environmental benefits derived from saving natural resources lowering pollution through the reduced use of petroleum-based fuels and paper
“The results of this study confirm the vast influence and driving importance of the ad-supported Internet to the overall economy,” said Randall Rothenberg, President and CEO, IAB. “By understanding the total contribution of the Internet to the U.S. economy, we can more accurately assess the impact of potential legislative changes on the Internet’s operations, particularly the consequences of any actions that would alter ad-supported business models.”
The research divided the Internet ecosystem into 14 different types of companies:
* Internet service providers (ISPs)
* Hardware providers
* IT consulting and solutions companies
* Software companies
* Web hosting and content management companies
* Search engines and portals
* Content sites
* Software as a Service (SaaS)
* Ad agencies and support services
* Ad networks
* E-mail marketing and support
* Enterprise staffs and subcontractors responsible for Internet advertising, marketing and web design
* E-commerce companies, including physical delivery
* B2B e-commerce
To read the full study, please go to www.iab.net.
About the IAB:
The Interactive Advertising Bureau (IAB) is comprised of more than 375 leading media and technology companies who are responsible for selling 86% of online advertising in the United States. On behalf of its members, the IAB is dedicated to the growth of the interactive advertising marketplace, of interactive’s share of total marketing spend, and of its members’ share of total marketing spend. The IAB educates marketers, agencies, media companies and the wider business community about the value of interactive advertising. Working with its member companies, the IAB evaluates and recommends standards and practices and fields critical research on interactive advertising. Founded in 1996, the IAB is headquartered in New York City with a Public Policy office in Washington, D.C. For more information, please visit www.iab.net.