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Web economy in G20 set to double by 2016, Google says

2012-01-27 06:32:45

By Tim Weber Business editor, BBC News website, Davos

The value of the web economy in G20 countries will nearly double by 2016,

according to Boston Consulting Group.

Driving the spurt from $2.3tn ( 1.5tn) to $4.2tn ( 2.7tn) will be the rapid

rise of mobile internet access.

The study, commissioned by web giant Google, assumes that in four years 3bn

people will be using the internet, or nearly 50% of the world's population.

The research suggests that the UK is one of the most advanced e-commerce

economies.

Right now, every year about 200 million people are going online for the very

first time.

However, traditional internet access via a copper wire and a desktop PC will

fade into the background.

The rapid fall in the cost of smartphones - with cheap versions now costing

about $100 - means that by 2016 about 80% of all internet users will access the

web using a mobile phone.

The research does not even account for web access using so-called feature

phones.

The 'new' internet

These numbers look impressive, but they are still just a fraction of the global

economy.

Start Quote

We don't fill empty holes on websites any more, we engage customers

Michael Lazerow Chief executive of Buddymedia

The searh for e-commerce 3.0

In 2010, the internet economy in the G20 group of leading nations was worth

$2.3tn - larger than the economies of Italy or Brazil, but a mere 4.1% of the

total size of all G20 economies.

The Boston Consulting Group (BCG) reseachers speak of the emergence of a "new

internet" where:

web access will not be a luxury any more

the majority of web users will live in emerging markets (within four years,

China is expected to be home to 800 million people using the internet; that is

more than the United States, India, France, Germany and the UK taken together)

about 80% of all internet users will access the web from a mobile

the internet will go social, and allow customers and companies to engage with

each other

This trend will be coupled with another huge technology shift that will

fundamentally change the nature of how to run a business - the rise of the

so-called "internet of things", where all kinds of devices from sensors to cars

to radiators will be connected to the web.

Start Quote

Understanding the economic potential of the web should be an urgent priority

for leaders

Patrick Pichette Google chief financial officer

Technology giant IBM estimates that by 2015, one trillion devices will be

internet-connected.

Online is also reaching into the offline world. The BCG researchers say that

every household already researches about $3,000 worth of goods online before

buying them in traditional stores.

Digital, the researchers say, cannot be an add-on. Businesses have to adapt

their people, processes and structures for the digital economy.

Paul Zwillenberg of BCG says that entrepreneurs building a digital business are

outperforming rivals who do not embrace the web economy.

However, what the research fails to capture is the balance of employment

between new, more efficient digital companies and old-style businesses.

The winners

Google, who commissioned the research, is obviously one of the companies set to

gain most from the rapid growth of the internet.

"Understanding the economic potential of the web should be an urgent priority

for leaders... [with] a powerful case for countries and companies to get online

and reap the rewards of an age of data," Patrick Pichette, Google's chief

financial officer, says.

However, the report suggests that Google will not be the only winner.

The researchers identify several "internet ecosystems" that will try to tie

users in to their customised part of the internet, among them Amazon, Apple,

Facebook, Google, Baidu and Tencent in China and Yandex in Russia.

What is digital?

A problem with BCG's research is obviously that it is difficult to define what

is actually part of the digital economy.

"During the research we discovered very quickly that there is no approved way

of measuring the internet economy," says David Dean, a managing director at

BCG.

Official statistics simply do not capture the sideways move of old technologies

into the digital world, for example when a widget maker starts upgrading its

devices so that they can be hooked up to the internet.

But if the report's predictions are correct, then speaking of a "web economy"

will soon sound about as comical as speaking of an "electricity economy".

David Dean believes that the G20 countries could reach this moment as early as

2020.