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Thursday, June 10, 1999 Published at 06:57 GMT 07:57 UK


Business: The Economy

Internet a multi-billion dollar economy



Trading on the Internet has turned into a money spinner.

The Web economy generated more than $300bn in revenue in the United States alone and created more than 1.2 million jobs, according to a study from the University of Texas.

Sponsored by Cisco Systems, the researchers talked to more than 3,000 companies trading goods and services online, to find out how much business they did during 1998.

Just over $100bn of trade came from 'traditional' Internet commerce, for example the sales of books, CDs and toys by retailers like Amazon.com, barnesandnobles.com or eToys.

The Internet middlemen, like travel agents and Online stock brokers, raked in nearly $58bn.

The Internet's best customer

But the Internet's best customer is - the Internet itself.

Nearly half the total Web revenue came from the sale of hardware and software necessary to conduct e-commerce and to build the infrastructure of the Net.

Growth industry

The speed with which the Internet's economic potential is growing has baffled the study's authors.

For the past three years, revenue generated on the Internet has been doubling every year, and there is no slowdown in sight.

The report's findings "seem to exceed all prior estimates" of the Internet economy, according to Anitesh Barua, co-author of the study and Associate Professor at the University of Texas.

Three years ago, he says, there was hardly any e-commerce. Now "the growth rate is nothing short of astounding".

Mr Barua said that online commerce will "ultimately ... go through the roof".

The players

And it is not only the big names on the Internet that manage to chalk up sales.

The many small online players are generating a surprising amount of revenue.

Ethan Harris, a senior economist with investment bank Lehman Brothers, said the study demolished the assumption by many analysts that Internet sales were concentrated among a few big companies.

"What they found, in fact, is that there are thousands of companies selling on the Internet", Mr Harris said. "That argues for continued growth."

Data mining

Just as the Internet has given every web surfer the potential to be his own publisher, it has reduced the costs for entrepreneurs to set up shop - and reach a global customer base.

That makes it difficult to estimate the true size of online commerce. Nonetheless, the US Commerce Department announced earlier this year that it would now track the size of consumer sales on the Internet.

The first set of data will be available in the middle of next year.

The University of Texas, meanwhile, plans to update its survey every quarter.





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