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The ad-supported internet ecosystem contributed roughly $742 billion to the US economy in 2011, equating to 5.1% of total GDP ($14.5 billion), finds the IAB in a new study [pdf] released in October, conducted by researchers at Harvard University. That $742 billion figure is up from $475 billion in 2007. To reach those dollar figures, the study averages 3 estimates of the contribution of the internet ecosystem: an employment-based approach; exports to the rest of the economy; and time spent on the internet.

Overall, the internet ecosystem’s GDP growth of 56% between 2007 and 2011 far outshines overall GDP growth of 5% during the same time period.

A March 2012 study by the Boston Consulting Group came up with similar results, finding the internet economy accounting for 4.7% of the US GDP in 2010.

Approaches Give Different Results; All Show Growth

The IAB study indicates that because the 3 methods used to estimate the internet ecosystem’s value are intended to “triangulate” on the precise answer, they can be averaged to form the single $742 billion value. The study notes, though, that the 3 approaches result in quite dissimilar results, with 2 offering similar growth, and the third much slower.

The first method, an employment-based approach, puts the internet ecosystem’s value at $530 billion, up 77% from 2007’s $300 billion. The second method, looking at exports to the rest of the economy, has the highest valuation for the internet ecosystem, at $862 billion, and the fastest growth, of 94%. The third method, examining time spent on the internet, also gives a high valuation ($833 billion), but shows the slowest growth from 2007, of 23%.

Other Findings:

  • The ad-supported internet ecosystem employed 5.1 million Americans in 2011 either directly or indirectly. [Tweet this]
  • California housed the largest amount of US internet firm headquarters (128), ahead of New York (102), but New York takes the lead in the number of employees whose firms were headquartered in the state (239,000).
  • Of the 2 million Americans directly employed by the ad-supported digital ecosystem, consumer services (885,000) were responsible for the largest amount, followed by consumer support services (435,000), infrastructure (420,000), and infrastructure support (420,000).
  • The infrastructure layer (which includes transmission providers such as AT&T, connectivity providers such as Clearwire Corporation, and hardware & co-location companies, such as Cisco Systems) has seen the fastest growth in direct employment between 2007 and 2011,  jumping 300%. The consumer support services layer (which includes a variety of marketing support agencies, navigation, and general enterprise) is not far behind at 229% growth. As the study concludes, within the consumer services layers, “the engine of growth was not just firms like Twitter, but firms that used their data.”
  • Sole proprietors and very small firms were responsible for 375,000 of the 2 million full-time equivalent jobs in the sector.
  • Application development accounted for 35,000 full-time equivalent jobs, with the number of “moonlighters” significantly higher.

About the Data: The study’s employment-based method computes the number of jobs that depend on the existence of the Internet and estimate the salaries and wages paid to these jobs. The exports method computes payments to firms for internet services, viewing the internet as if it were an island exporting to the rest of the economy. The time spent method values the time that users spend on the internet at its marginal value. The study follows, to the extent possible, the structure and method of an earlier IAB study, published in 2009 based on data from 2007. This update relies on data from 2011 and, when available, from the first two quarters of 2012. A marginally different set of categories was applied to the 2011 internet ecosystem to reflect structural changes, and the 2007 employment was corrected from 1.2 million to 1.015 million to reflect a computation error in the earlier report.

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