PREMIUM SEARCH Search by job title, geography and build a list of executive contacts
Internet stocks may have taken a beating this year, but the Internet economy is continuing to boom, according to a new report released on June 6 from the Center for Research in Electronic Commerce at the University of Texas at Austin. Among the 30 biggest Internet companies, revenue growth jumped 40% year-over-year in the first quarter, the report says. And that growth isn't slowing, despite the Federal Reserve's efforts to cool a red-hot economy by raising interest rates. In fact, total revenue from Internet-related companies is likely to hit $850 billion this year, vs. $524 billion in 1999, the Austin researchers estimate.
Nearly a quarter of all jobs -- 650,000 -- created last year were Internet-related, says professor Andrew Whinston, director of the research center. And Internet-related employment in 1999 totaled 2.48 million, a 36% jump over the previous year. That's twice as many workers as were employed in the airline, chemical, legal, and real estate industries combined. Fed Chairman Alan Greenspan would be pleased to hear that revenue per employee -- a key productivity measure -- rocketed 19% in 1999, vs. the previous year, far beyond increased productivity in other sectors of the economy.
The report emphasizes that dollar-wise, the Internet economy is still a relatively small part of the $8 trillion U.S. economy. But Net business continues to grow faster than most projections -- a 62% increase in 1999 -- and there's no end in sight. At the current growth rate, revenue from Internet-related companies will outpace that of the auto industry this year, Whinston predicts.
REAMS OF DATA.
This is the third report in an ongoing study of the Internet economy, and government and private-sector economists agree it is probably the most comprehensive and accurate attempt yet to measure the impact of the Internet on the overall economy. The study doesn't just include money spent on products ordered on the Internet. Revenue and jobs were measured using four key sectors of the Internet economy -- infrastructure, applications, e-commerce, and intermediaries -- with adjustments to make up for overlaps. For example, Cisco Systems, which builds networking and server equipment, counts as an infrastructure company. Oracle is an example of an applications company. Amazon.com is an e-commerce leader. And Yahoo! is classified as an intermediary company.
Economists at the center have compiled reams of research data, Securities & Exchange Commission filings by public companies, and extensive interviews with companies. That included telephone interviews with execs of 2,600 smaller companies that have Internet-related businesses and on-site, in-depth interviews with 345 of the bigger players.
A new report from the Commerce Dept., released on June 5, backs up the University of Texas study in terms of the influence new technologies have on the economy. The government study, entitled Digital Economy 2000, shows that the Internet has been an important driver of U.S. economic growth. Commerce found that information-technology industries accounted for half or more of the recent productivity boom. The report also showed that falling IT prices have "directly" lowered the overall inflation rate by an average of 0.5 percentage points a year.
While Commerce's report had a conclusion similar to that of the University of Texas study, the feds acknowledge that for now, the university researchers are probably able to measure business activity more accurately than they are. Either way, this Net ride isn't over yet -- not by a long shot.
By Beth Belton and Laura Cohn in Washington
EDITED BY DOUGLAS HARBRECHT
Get BusinessWeek directly on your desktop with our RSS feeds.
Add BusinessWeek news to your Web site with our headline feed.
Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.
To subscribe online to BusinessWeek magazine, please click here.
Copyright 2000 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
