Assessing the economic impact of the internet

As the London Conference on Cyberspace starts today, the morning news carried stories of the risks and threats posed by the growth of the internet. At the conference, McKinsey Global Institute will be presenting their research paper “The great transformer: the impact of the internet on economic growth and prosperity”. This will highlight the enormous value the internet economy has brought and its potential to boost growth across the globe.

Of particular interest is the growth of “micro-multinational” entrepreneurial firms. The internet enables small businesses to be global from the outset; the huge investment in technology and systems which were formerly required to reach a worldwide market are a thing of the past.

The paper highlights the positive economic effects of the internet and estimates that “If internet consumption were a sector, its size in GDP would be bigger than the energy or agricultural industries. It is also growing faster than the GDP of Brazil.”

One of the key points is that companies today need to pay attention to how quickly internet technologies can disrupt business models by radically changing markets and driving efficiencies. An increasingly globalised market and the speed of change inherent in the internet mean that your next competitor may not even exist today, and companies need to be prepared for this.