Valuing the Internet

[Commentary] Everyone has heard the hype about the Internet's miraculous ability to spur the economy. That hype has helped drive both the development of new businesses and government investments in Internet infrastructure. Hong Kong and other Asian governments, for instance, have spent immense private and public capital laying telecom cable and the like. But the question remains for many Asian governments -- is it worth it?

At Google we asked Boston Consulting Group to put together a study that helps answer that question in a concrete way. Until now, Internet true-believers have tended toward novel measures to justify such investments. They don't have much choice. What dollar amount do you put on keeping track of friends, planning routes quickly or more easily sharing jokes? Google's economist, Hal Varian, recently estimated that the time saved by our search engine alone was worth $65 billion a year to the U.S. economy. But few of us think in such abstract terms as saved time, even when the sums at stake are enormous. We are commissioning a series of studies in Asia that tries to put this issue in more comprehensible terms by measuring the Internet's contribution to GDP. This shifts the debate away from nebulous concepts such as "speeding up business processes" and "allowing companies to reach new customers" by looking at the bottom line: How much do all the Internet's benefits, taken together, add to an economy? The first study, "The Connected Harbour," looks at Hong Kong, among the most wired and the most freewheeling of Asian economies. More than 80% of Hong Kong's households have broadband access. While many Asian countries aspire to that level of connectivity, not all of them also boast Hong Kong's online openness. The territory has from the beginning kept the bidding for mobile-network licenses competitive, enshrined in law unfettered online commentary, and put a host of government services online. It is balancing the needs of copyright holders against the pace of the Internet's innovations. Hong Kong, therefore, shows what the Internet can be when it's allowed to be itself. The results are impressive. BCG estimates that in 2009 Hong Kong's Internet economy was worth 5.9% of the GDP—just behind the 7% that manufacturing industry contributes.

[Alegre is President, Asia Pacific at Google]