Packers & Friends ..
Oh sure the markets are getting hit & a few are bashing those net stocks, as they will continue to do .. here's a good story for those who still think this net thing is a fad.
June 11, 1999
The Net Really Is Big
There are still some people
who think the Internet is
little more than a sideshow.
They look at the valuations
of Internet companies with
a mixture of amusement
and alarm. They think that
bricks-and-mortar businesses have all the
time in the world to launch a cohesive
Internet strategy.
These Luddites are wrong, and a
just-completed study of the Internet
industry should help quiet them once and
for all.
The study found that the U.S. Internet
industry generated $300 billion in
revenues in 1998. That's nearly as big as
the U.S. auto industry, which totaled
$350 billion. And it's larger than energy,
at $225 billion.
Here's another number. The Internet
industry grew at a compounded annual
rate of 175% between 1995 and 1998.
And another number: The average annual
revenue that the 1.2 million Internet
employees generate is $250,000, about
65% higher than workers in the industrial
sector. At some of the most efficient
Internet companies, like Cisco and Dell,
the number is $690,000. Many of these
1.2 million jobs, such as Web design and
development, didn't even exist before.
Some are sure to scoff at these numbers
as too large. I initially did. But the
researchers were very thorough. Phone
interviews were conducted with 2,830 of
the smaller Internet companies, and
in-depth interviews with the 100 largest.
Here's how the $300 billion Internet
industry breaks down. The report divides
the industry into four layers. The first
layer is the Internet infrastructure:
products such as Cisco routers, Qwest
fiber networks and Sun servers. This layer
accounted for $115 billion in revenues
and 370,000 jobs.
The second layer is Internet applications:
Oracle databases, BroadVision
e-commerce software and Inktomi search
engines. This layer accounted for $56
billion in revenues and 230,000 jobs.
The third layer is Internet intermediaries:
Yahoo's portal, DoubleClick's advertising
brokerage, and CNET's news. This layer
accounted for $58 billion in revenues and
250,000 jobs.
The fourth layer is Internet commerce:
Amazon's books, TheStreet.com's paid
subscribers, and Dell's direct sales of PCs.
This layer accounted for $102 billion in
revenues and 480,000 jobs.
(If you go to the trouble of adding up the
four layers you'll find it totals $331 billion.
That number was reduced by researchers
to $300 billion because of probable
double-counting of revenues between the
layers.)
The study was commissioned by Cisco,
and undertaken by professors from the
University of Texas. I argued with Prof.
Andrew Whinston that it is not possible to
separate Internet intermediaries from
Internet commerce. After all, what's the
difference between Amazon (classified as
commerce), and E*Trade (classified as an
intermediary)?
He disagreed with me. But it's not that
important. What is important is that there
is now another quantitative study of the
Internet which clearly shows its economic
impact.
The results of the study, along with links
to other Internet research, is at
www.internetindicators.com. Cisco is
contracting with the University of Texas
to update and expand the study on an
ongoing basis. Those results will be
posted on the Website as well.
The site should prove to be a valuable
resource of information to confront the
arguments that no doubt will continue to
come from the Luddites of the world. |
