Why Internet/GDP Ratios Make No Sense

[Commentary] The Economist reprinted a chart from a BCG report, which purported to show the contribution of “the internet” to the total GDP of various different countries. Britain comes out on top, with an internet-to-GDP ratio of 8.3%; it’s followed by Korea, China, Japan, USA, India, and Australia. After the UK, the highest-ranking European country is Germany, on just 3.3%, while Canada lags far behind the US.

All of this was rather puzzling to me, so I spoke to BCG’s Paul Zwillenberg, one of the authors of the report. And the main thing I wanted to know, of course, was how on earth you could turn “the internet” into an annual dollar amount divisible by national GDP. “It’s like electricity. It’s part and parcel of the fabric of daily life,” Zwillenberg said, almost before I could ask my question. “It’s touching every part of the economy.” I’m inclined to agree — but you’d never dream of measuring different countries’ electricity-to-GDP ratios. So what’s he doing here? Zwillenberg did say that in ten years or so, “you won’t need to measure the internet economy because it will be totally pervasive.” But for the time being, he’s determined to measure the internet. And the way he’s doing it is very web 1.0. It seems to me that BCG’s not really measuring the internet here — it’s not measuring the hours spent watching YouTube, or interacting with friends on Facebook and Tumblr, or spreading news on Twitter, or even checking your stock portfolio or updating your billing information somewhere. It’s measuring e-commerce, primarily, which is an interesting subset of the internet, and one of the oldest, but ultimately just a fraction of what it can be. And when you’re measuring e-commerce, you’re measuring lots of things which aren’t really internet-related at all.