Ad-Supported Internet Creates 5.1 Million Jobs, Adds $530 Billion to Economy

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Kicking off the ninth (can you believe it?) Advertising Week, the Interactive Advertising Bureau, at its IAB MIXX Conference, has released new research conducted by the Harvard Business School that found the ad-supported internet is responsible for 5.1 million U.S. jobs. The sector increased 100 percent over the past four years and contributed $530 billion to the U.S. economy in 2011, double that of 2007. In addition, the sector accounted for 3.7 percent of the U.S. gross domestic product.

The report shows New York and California as home to the headquarters of the largest number of U.S. internet firms. This, of course, is due to the prominence of Madison Avenue and Silicon Valley as digital business hubs. In addition, Washington, Massachusetts, and Illinois are the next three most digital-friendly states. In total, nine states are the sites of headquarters that account for 72 percent of attributed employment, although the jobs themselves were dispersed across other states in the union:

State Number of Firms Headquartered in the State Number of Employees Whose Firms are Headquartered in the State
New York 102 239,000
California 128 215,000
Washington 24 64,000
Massachusetts 29 60,000
Illinois 22 38,000
Minnesota 10 29,000
Pennsylvania 11 28,000
Arkansas 3 26,000
Colorado 8 19,000

In line with previous reports, every congressional district in the U.S. was home to at least a handful of companies within the internet ecosystem and many had thousands of such companies. The services that support internet entrepreneurs have allowed businesses to be sited far from the traditional centers of industrial employment.

Montana, for example, a state best known for agriculture, supports more Internet ecosystem businesses (from one-man shops to larger companies) than New York City's 8th congressional district, which constitutes the majority of Manhattan's west side and southern tip, as well as parts of Brooklyn.

Sole proprietors and very small firms were cited as big winners:

- They contributed 375,000 full time equivalent jobs to the 2 million in the internet ecosystem.

- Many were selling on Amazon, eBay and Etsy. Many others were self-employed web designers, writers and programmers.

- App development alone accounted for 35,000 full-time equivalent jobs, and the number of moonlighters was an order of magnitude larger.

- Job creation was highly dispersed, with less growth in aggregate and in percentage terms in the megaplexes of Google, Microsoft and Yahoo! than in the tiny entrepreneurial ventures across every state and county which, themselves, are enabled by cloud computing, merchant platform services such as Amazon, brokers such as Craigslist, advertising media like YouTube, small finance providers like Kickstarter, payment facilitators such as Square, and social networks, recommendation engines, and search engines that have helped small sellers to find customers even though they lack the resources to build broadly recognized brands.

The biggest increase in jobs over the four-year period was seen within the infrastructure (300%) and consumer support service (229%) layers, although consumer services still ranks as the area with highest employment number (885,000).

The ad-supported digital industry directly employs 2 million Americans, and indirectly employs a further 3.1 million in other sectors.

Layer 2007 Direct Employment 2011 Direct Employment Percent Growth
Infrastructure 140,000 420,000 300%
Infrastructure Support 165,000 254,000 54%
Consumer Support Services 190,000 435,000 229%
Consumer Services 520,000 885,000 65%
TOTAL 1,015,000 1,999,000 197%

Of these growth areas, Harvard Professor John Deighton said, "One of the most striking findings of this report is that growth was fast in the consumer-facing layer but that it was even faster in the less glamorous infrastructure layer that supports the high-profile brand name sites and services. Jobs grew fastest in digital advertising agencies, ad networks, ad exchanges, customer analytics firms, and listening platforms. The engine of growth was not just consumer-facing companies like Facebook, Twitter and YouTube, but also firms that used the data spun off by them."

And of the the overall growth cited in the study, IAB CEO Randall Rothenberg said, "The rapid growth of the ad-supported internet has become a major driver in the U.S. economy. All this, despite a challenging economic climate. With encouragement from regulators and legislators in Washington, D.C. and other world capitals, there is no doubt that the interactive marketplace will bring an even greater number of jobs into the fold - not only in America, but across the globe providing strong economic value in the years to come."

You can view and download the entire study here.

by Steve Hall    Oct- 1-12   Click to Comment   
Topic: Industry Events, Research, Trends and Culture   

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