Accelerating Competitiveness In an Innovation Nation

The U.S. economy is undergoing a radical transformation driven by the market-creating power of the internet. Never have the barriers to entry for individuals and small businesses been lower, the potential for market growth been higher and the risk of market-stifling regulations been greater.

This week, the Interactive Advertising Bureau released a thorough analysis of the market-enabling power of the internet. The findings are remarkable. The study, conducted by Dr. John Deighton, Harold M. Brierley Professor of Business Administration Emeritus at Harvard Business School, shows that over the past four years, the internet economy has grown seven times faster than the U.S. economy, accounting for 12 percent of the U.S. gross domestic product. That translates into more than 17 million jobs, 38 percent of which were created by small businesses and self-employed individuals. We estimate that, out of this last group, 1.3 million jobs could not exist without the internet.

While the job growth numbers are impressive, they are just one measure of our economic transformation. As more and more activities move online, overall costs decrease, the speed of innovation increases and new markets are created.

One of the tens of thousands of companies benefiting from this transformation is Aplós, an alcohol-free spirit company launched last year. Due to alcohol regulations, the traditional marketing approach for spirit companies is a wholesale model, dependent on distributors and on-premises sales. As a nonalcoholic spirit, Aplós was able to work outside of that system and develop a modern go-to-market and distribution strategy that leveraged digital channels to reach customers directly.

This approach gave the company access to online marketing data informing its business strategy, allowing them to find customers more efficiently and form direct relationships with them. Going online lowered the cost to entry, allowing the company to be more nimble and sophisticated with its interactive advertising strategies. David Fudge, the co-founder of Aplós, told me that, thanks to the precision, immediacy and cost efficiencies of digital marketing, the business is on track to far exceed its revenue and growth projections, which would have been much more difficult if it had chosen to launch in more traditional channels.

There are 2.1 million companies in the United States that, like Aplós, benefit from the internet economy’s ability to democratize business creation, allowing small businesses to scale quickly and even disrupt entire industries.

This evolving and proven small-business accelerator should also challenge us to rethink our idea of what it means to be small. No longer limited by geographic reach, the internet allows nearly any business of any size to instantly access the global marketplace.

To this point, every U.S. congressional district benefits from the job-creating power of the internet.

Although there are seven congressional districts that each have at least 10 percent of their residents who work directly in the internet ecosystem, those districts account for just 9 percent of total U.S. internet employment. The other 91 percent of internet employment is spread across 425 congressional districts. And more than 60 percent of congressional districts — 272, to be exact — have at least 10,000 internet-dependent jobs. From Wyoming to West Virginia, the internet economy is pushing the traditional geographic limits for how far small businesses can go to reach consumers.

As regulators continue to examine online and digital data policies, it’s vital that they understand how the internet is revolutionizing our economy and what overly restrictive rules could do to this remarkable growth rate.

We are no longer an industrial economy that uses the internet to do marketing. We are now an internet economy that creates markets.


David Cohen is chief executive officer of the Interactive Advertising Bureau.

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