Study: Internet economy has created 1.2M jobs

Job boost comes with 10% of sales now being made online

As the automobile industry sheds jobs, it comes as good news that over the last decade or so the Internet has created 1.2 million jobs, many paying higher salaries than average, a new study finds.

Internet business contributes 2.1%, or $300 billion, to the total GDP (gross domestic product) of the U.S. And IT and related online business may be faring better in this recession than they did in the dotcom bubble of 2000-2002, still growing revenue but at slower pace.

Consumers are now making 10% of their retail purchases online, with the exception of groceries, on the Internet, and Internet-based advertising has increased four-fold since 2002 to more than $20 billion, said John Deighton, a professor of business administration at Harvard Business School, and one of the authors of the study along with Hamilton Consultants Inc.

The study, considered independent, attempts to measure the so-called Internet economy. It was prepared for the Internet Advertising Bureau (IAB) in New York, which represents a variety of Internet and media companies.

It does not raise policy implications, but IAB officials said the data will help them make the case for self-regulation on issues such as privacy. Randall Rothenberg, president and CEO of IAB, said the report is the "first rigorous, comprehensive look at the size scope and impact of the interactive advertising ecosystem."

Deighton said the finding could help make the case for a move away from employer-based health care, which he called something out of the Middle Ages, to a system that makes it easier for people to start new businesses without having to provide health coverage.

The study's job estimate is based on people who work directly in building or maintaining the Internet's infrastructure, conduct advertising and commerce over it, and other direct uses. The number of indirect jobs supported by Internet-related activities may raise the total number of jobs by 1.54 million, or to slightly more than 3 million supported jobs.

E-commerce companies, as well as those that deliver the physical goods, were the major employers, with more than 500,000 of the 1.2 million jobs. Internet service providers followed at 181,000. Content-related employment was estimated at nearly 60,000, and software as a service, 31,500.

John Yaglenski, who runs the independent Walt Disney World travel information site Intercot.com, along with 35 volunteers, was at the announcement today and said that that regulation that imposes new requirements and restricts information collection could have a serious impact.

Yaglenski said he has privacy policies clearly outlined on his site and believes the industry is capable of regulating itself. "If the government steps in and regulates the industry to the degree that it has done in some other areas it could really affect our livelihood," he said.

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