G-20’s Internet economy set to reach US$4.2 trillion by 2016

By SMBWorld Asia Editors | Jan 30, 2012

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Companies that make extensive use of the Internet—including social media—to sell, market, and interact with their customers and suppliers grow faster than those that do not, according to The Boston Consulting Group (BCG).  

In a new report, BCG finds that consumers are starting to derive extraordinary value from the Internet. Across the G-20, US$1.3 trillion of goods was researched online before being purchased offline—representing 2.7 percent of GDP, or more than $3,000 per connected household.

In the largest G-20 economies, the perceived value that consumers place on the Internet, above what they already pay, is $1.9 trillion, or $5,000 per connected household.

In the U.S., businesses with a medium or high Internet presence expect to grow by 17 percent over the next three years, compared with 12 percent for other companies.

In the U.K., the overall sales of businesses with a medium or high Internet presence rose by 4.1 percent each year from 2007 to 2010—about seven times faster than so-called low-Web and no-Web businesses.

This trend is consistent across all the countries surveyed, underscoring the Internet’s contribution to economic growth and jobs creation.

Focus on the Digital Balance Sheet

According to the report, the uninterrupted growth of the Internet economy is not a foregone conclusion. Businesses need to take an adaptive approach to strategy, manage their legacy businesses while creating new ones, and develop new capabilities, organisational structures, and cultures.

“We are still only at the beginning of realizing the potential of the Internet,” said Paul Zwillenberg, another coauthor of the report and a partner at BCG. “To compete, companies need to strengthen what we call their digital balance sheets by building their digital assets and reining in their digital liabilities to create digital advantage.”

The report also urges governments to take actions that support rather than impede progress.

“In setting policies, government should be guided by what is needed to encourage growth, innovation, and consumer choice rather than by dogma,” said Zwillenberg. “In most areas, governments should let the market sort out the winners and losers.”

BCG makes the case that businesses will be fundamentally transformed over the next five years. It also urges action by companies and countries, recommending the creation of a “digital balance sheet” and offering an agenda for chief executives and policymakers to build their digital advantage.

“No company or country can afford to ignore this development. Every business needs to go digital,” says David Dean, a coauthor of the report and a senior partner at BCG. “The ‘new’ Internet is no longer largely Western, accessed from your PC. It is now global, ubiquitous, and participatory.”