Internet Economy Reported Contributing to 4.7% of US ’10 GDP

March 20, 2012

bcg-internet-economy-percentage-of-gdp-in2010-march2012.jpgThe internet economy accounted for 4.7% of the US gross domestic product (GDP) in 2010, and on average 4.3% of developed market GDPs, according to March 2012 Boston Consulting Group analysis of data from the Economist Intelligence Unit (EIU), Organization for Economic Development (OECD), and various country statistical agencies. The economic impact of the internet was highest in the UK (8.3%) and South Korea (7.3%), while accounting for 4.1% of GDP in the G-20 countries, and 3.6% on average for developing markets.

For comparison’s sake, the report notes that the internet economy’s contribution to 2010 US GDP exceeded that of the federal government.

Impact to Keep on Humming

The BCG analysis indicates that the internet’s economic impact will keep growing in the next several years. By 2016, it is forecast to account for 12.4% of the UK’s GDP, representing a compound annual growth rate (CAGR) of 10.9% from 2010-2016. It will also have a significant impact in a variety of other leading economies: it is forecast to account for 8% of GDP in South Korea (CAGR of 7.4%), 6.9% in China (CAGR of 17.4%), and 5.6% in India (CAGR of 23%).

The internet is expected to contribute to 5.4% of the US economy, marking a comparatively slow CAGR of 6.5%. Overall, BCG predicts the internet economy to account for 5.3% of GDP in the G-20 countries, 5.5% on average of developed market GDPs, and 4.9% on average of developing market GDPs.

Online to Take Massive Chunk of UK Retail

bcg-online-retail-percentage-total-retail-in-2016-march2012.jpgMeanwhile, online retail is predicted to contribute to a rising share of the retail economy in the G-20, but nowhere more so than in the UK, which the BCG attributes to high internet penetration, a competitive market, high credit card usage, and efficient infrastructure. In fact, online retail is expected to represent 23% of the total UK retail economy in 2016. Other countries where online retail will play an influence include Germany (11.7%) and Australia (8.9%), though the US (7.1%) is predicted to fall below the developed market average (8.5%).

Projections for leading developing markets include 4.5% for India, 4.3% for Brazil, 3.4% for China, and 3.2% for Russia, with the report noting that the figure for China reflects business-to-consumer retail only.

According to Translated’s December 2011 T-Index, a statistical index that determines the online market share per country by combining the internet population and the corresponding GDP per capita, the US (16.8%) will fall behind China (18.8%) in online market share by 2015, although the BDG analysis appears to dispute this.

Internet Has Huge Offline Impact Too

When factoring in the impact of online research prior to purchasing goods offline, or ROPO (research online, purchase offline), the internet’s impact becomes even more significant. Looking at the US and using Google-TNS and Euromonitor as sources, the BCG estimates that while the value of online retail was $252 billion in 2010, ROPO contributed an additional $482 billion. In fact, of the 20 countries measured, only the UK saw a higher value for online retail than for ROPO.

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