Study Shows Net’s Growing Contribution to Economy

Internet-related activity by U.S. companies accounted for 1.2 million jobs and generated $301 billion in revenue last year, surpassing the energy and telecommunications sectors, according to an extensive study to be released today.

The study, commissioned by Cisco Systems and conducted by two professors at the University of Texas Center for Research on Electronic Commerce in Austin, found that Internet-related work was far more efficient than other sectors, generating $250,000 in revenue per person, compared with $165,000 per person in the auto-making sector, for example.

Anitesh Barua, an associate professor of information systems at the University of Texas who co-authored the study, said he came up with a far larger estimate for Internet activity than many earlier studies in large part because he surveyed a far larger sample, screening 27,000 companies and conducting phone or personal interviews with 3,000.

Among the surprises, Barua said, was a grocery chain in a metropolitan area that didn’t show up on top-100 lists of Net companies even though it had $32 million in Web sales last year.

Ethan Harris, a senior economist at Lehman Bros. who was asked by Cisco to make an independent assessment of the study, warned that the $301 billion isn’t an accurate representation of the Net’s contribution to the economy.

Harris said a more accurate measure would look specifically at the value a particular Internet business adds to the economy. For Amazon.com, for example, the cost it pays its book wholesalers would be subtracted from its sales. Harris figures such a measure would reduce the Internet sector by about half.

Nevertheless, the study shows how quickly the Internet has emerged as a major component of the economy, starting from close to zero five years ago, Harris said. The 1.2 million workers in Net-related fields now account for 20% of the high-tech sector and generate revenue per person that is 65% higher than workers in the industrial sector.