John Quelch, Professor of Business Administration at Harvard Business School, recently quantified the impact of the Internet on the U.S. economy:

A recent study we prepared with Hamilton Consultants for the Interactive Advertising Bureau uses three methods to value the contribution of the advertising-supported Internet to the U.S. economy:

1. Employment value The Internet employs 1.2 million people directly to conduct advertising and commerce, build and maintain the infrastructure, and facilitate its use. Each Internet job supports approximately 1.54 additional jobs elsewhere in the economy, for a total of 3.05 million, or roughly 2 percent, of employed Americans. The dollar value of their wages is about $300 billion, or around 2 percent of U.S. GDP.

2. Payments value.The direct economic value the Internet provides to the rest of the U.S. economy is estimated at $175 billion. It comprises $20 billion of advertising services, $85 billion of retail transactions (net of cost of goods), and $70 billion of direct payments to Internet service providers. In addition, the Internet indirectly generates economic activity that takes place elsewhere in the economy. Using the same multiplier as for employment, 1.54, then the advertising-supported Internet creates annual value of $444 billion.

3. Time value. At work and at leisure, about 190 million people in the United States spend, on average, 68 hours a month on the Internet. A conservative valuation of this time is an estimated $680 billion.

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