Internet Economy to reach $4.2 trillion by 2016. 5 reasons this figure is an understatement.

In a report made public earlier this year Boston Consulting Group stated that the Internet Economy in G20 countries is expected to reach $4.2 trillion by 2016. The company also expects the number of internet connected users to reach 3 billion (just for the record – there are now approximately 2.2 billion).

At first sight this might seem like a huge figure but I believe that the company understated the importance and potential growth of the internet economy. Yes, I believe $4.2 trillion is an understatement. Why?

1. $4.2 trillion means less than 7 times Apple’s market cap. Yes, Apple might be the largest company ever, in terms of market capitalization but it’s just one company and it means the combined brain and sales power of less than 50.000 employees.

2. The internet economy is still in its infancy. We have just began discovering viable business models that work on the Internet. Companies such as Apple, Google or Amazon innovated and improved on existing business models but are yet to reach their full potential. Amazon for example, has launched its first Kindle device 5 years ago. After half a decade its customers are buying more ebooks than printed editions. This kind of growth could not be expected or planed.

3. We do not have the economic models to understand Internet’s impact. Most of our economy is based on theories that were thought of and published in a time the concept of Internet was closer to science-fiction than academic research. More recent economic theories such as the behavioral economics approach are closer to reality and better at predicting the evolution of the internet economy.

4. The report understates the economic importance and impact of mobile internet. Fixed lines have helped us reach a 32% internet penetration. Mobile connections exceed in many developed and developing countries 100%. Smartphones and internet connected devices will replace older mobile devices. In less than 10 years I expect Internet penetration to reach past 70%. With such a high adoption rate Internet Economy is bound to exceed greatly the $4.2 trillion figure.

5. The figures are probably based on current growth and vastly underestimate innovation. Innovation is the key factor in understanding internet economy growth. The large ecosystem comprised of entrepreneurs, investment funds and talented engineers has taken the world by storm for the past 20 years. Ever since the dot com bubble this ecosystem has had its fair share of skepticism that is still deeply embedded in the economic world. Year after year pundits are proven wrong by this ever increasing sector. Innovation can’t be planned or measured very well for now but it is there and companies that foster innovation manage to increase their market share.

The internet economy has already surpassed in some of the G20 countries some very heavy economy sectors such as energy, agriculture or automotive. This trend will continue. By 2016 industries that have not been surpassed by the Internet will be the exception, not the rule.

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