IAB Report: Internet Economy Grew Seven Times Faster Than Total U.S. Economy.
A new study commissioned by the Interactive Advertising Bureau and led by a researcher from Harvard Business School found that the internet economy grew seven times faster than the total U.S. economy during the past four years, and now accounts for 12% of the U.S. gross domestic product. The internet economy’s contribution to the U.S. GDP grew 22% per year since 2016, in a national economy that grows 2-3% per year.
In 2020 alone, the IAB says the web contributed $2.45 trillion to the country’s $21.18 trillion GDP. Since IAB began measuring the economic impact of the internet in 2008, its contribution to GDP has grown eightfold, from $300 billion to $2.45 trillion.
During the eight years since the IAB’s last two studies, the internet has made business formation “a much more democratic process,” according to John Deighton, the Harold M. Brierley Professor of Business Administration Emeritus, Harvard Business School. “Not only large firms, but also large numbers of small firms and individuals, now have the platforms and tools to find customers, engage with them, and transact,” Deighton said. “And founders don’t need to bring large amounts of capital to the table. Investors have shown great willingness to supply the capital, confident that advertising, sale of subscriptions and licenses, and freemium options will get them an attractive return on their investment.”
David Cohen, Chief Executive of the IAB, said the internet is leading a “radical transformation” of the U.S. economy. “Not only are the barriers to entry lower, but the power of interactive advertising allows businesses to connect with consumers faster and more efficiently than ever before,” Cohen said. “As regulators continue to examine online and digital data policies, they must understand how the internet powers economic growth and how proposed regulations could slow or even stop that growth.”
The IAB’s 162-page study, “The Economic Impact of the Market-Making Internet – Advertising, Content, Commerce, and Innovation: Contribution to U.S. Employment and GDP,” includes a brief section devoted to digital audio. Focusing on the “explosive growth” of non-music audio, it notes that podcasting now encompasses 30 million episodes and close to 1 million active podcasts that reach over 100 million Americans each month. “As is so often the case with industries with a low barrier to entry, podcasting is a very long tail business, in which 1,000 downloads places the show in the 20% of all podcasts, 30,000 downloads places the show in the top 1% of all podcasts, and the median number of downloads is 123,” the report says. As widely reported, revenue for the podcasting sector is now approaching $1 billion annually. That’s a more than fivefold increase from the last IAB economic impact report four years ago.
One of the driving forces behind the growth of podcasting is “the continuing search for a viable business model in the streaming music sector,” the report says. “Non-music audio offers platforms a chance to monetize without having to pay revenue to third-party rights holders.”
In other findings from the report:
More than 17 million jobs in the U.S. were generated by the commercial internet, 7 million more than four years ago.
More internet jobs, 38%, were created by small firms and self-employed individuals than by the largest internet companies, which generated 34%.
There are 200,000 full-time equivalent jobs in the online creator economy. This number is just short of the combined memberships of craft and labor unions SAG-AFTRA (160,000), the American Federation of Musicians (80,000), the Writer’s Guild (24,000), and the Authors Guild (9,000)
Download the full report HERE.