the internet economy in g-20

The Connected World

Report

The Internet Economy in the G-20

The $4.2 Trillion Growth Opportunity

The Boston Consulting Group (BCG) is a global management consulting firm and the worlds leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep in sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 75 offices in 42 countries. For more information, please visit bcg.com.

The Connected World

ThE InTErnET Economy in the G-20

The $4.2 Trillion GrowTh opporTuniTy

DaviD Dean

SeBaSTian DiGranDe

DOminiC FielD

anDreaS lunDmark

James ODay

JOhn PineDa

Paul ZwillenBerG

March 2012 | The Boston Consulting Group

2 | The Internet Economy in the G-20

conTEnTs

3 INTRODUCTION

6 THE INTERNETS ECONOMIC IMPACT

10 THE INTERNETS FURTHER ECONOMIC IMPACT

12 CONSUMERS (EVERYWHERE) KNOW A GOOD DEAL WHEN THEY SEE IT

14 FROM HIGH-WEB TO NO-WEB: OPPORTUNITIES FOR SMALL AND MEDIUM ENTERPRISES

17 DONT BLINK: THE FUTURE IS RUSHING STRAIGHT AT US

18 COUNTRY PROFILES

53 NOTE TO THE READER

The Boston Consulting Group | 3

The January 2012 report in our Connected World series examined how companies and countries can win in the digital economy. This follow-up report provides a more comprehensive analysis of how the scale and speed of Internet-driven economic growth is changing countries, cultures, and companies around the world. It includes national snapshots capturing the economic impact of the Internet as well as in-depth looks into consumer and business usage in the G-20 countries.1 A forthcoming report will discuss how companies and countries can best build up their digital balance sheets and create digital advantage.

Since the day the first domain was registered in 1985, the Internet has not stopped growing. It has sailed through multiple recessions and one near-collapse and kept on increasing in use, size, reach, and im-pact. It has ingrained itself in daily life to the extent that most of us no longer think of it as anything new or special. The Internet has be-come, quite simply, indispensible.

By 2016, there will be 3 billion Internet users globallyalmost half the worlds population. The Internet economy will reach $4.2 trillion in the G-20 economies. If it were a national economy, the Internet economy would rank in the worlds top five, behind only the U.S., China, Japan, and India, and ahead of Germany. Across the G-20, it al-ready amounted to 4.1 percent of GDP, or $2.3 trillion, in 2010sur-passing the economies of Italy and Brazil. The Internet is contributing up to 8 percent of GDP in some economies, powering growth, and cre-ating jobs.

The scale and pace of change is still accelerating, and the nature of the Internetwho uses it, how, and for whatis changing rapidly too. Developing G-20 countries already have 800 million Internet users, more than all the developed G-20 countries combined. Social net-works reach about 80 percent of users in developed and developing economies alike. Mobile devicessmartphones and tabletswill ac-count for four out of five broadband connections by 2016.

The speed of these developments is often overlooked. Technology has long been characterized by exponential growthin processing speed, bandwidth, and data storage, among other thingsgoing back to Gor-don Moores observation nearly five decades ago. The Intel 80386 mi-croprocessor, introduced in the same year as that first domain name, held 275,000 transistors. Today, Intels Core i7 Sandy Bridge-E proces-sor holds 2.27 billion transistors, or nearly 213 times as many. As the growth motors along, it is easy to lose track of just how large the ex-ponential numbers get.

InTroDUcTIon


The power of exponential growth is illustrated by an ancient fable, re-popularized by Ray Kurzweil in his book, The Age of Spiritual Machines. It tells of a rich ruler who agrees to reward an enterprising subject starting with one grain of rice on the first square of a chessboard, then doubling the number of grains on each of the succeeding 63 squares. The ruler thinks hes getting off easy, and by the thirty-sec-ond square, he owes a mound weighing 100,000 kilograms, a large but manageable amount. Its in the second half of the chessboard that the real fun starts. Quickly, 100,000 becomes 400,000, then 1.6 million, and keeps growing. By the sixty-fourth square, the ruler owes his sub-ject 461 billion metric tons, more than 4 billion times as much as on the first half of the chessboard, and about 1,000 times global rice pro-duction in 2010.

The Internet has moved into the second half of the chessboard. (See Exhibit 1.) It has reached a scale and level of impact that no business, industry, or government can ignore. And like any technological phe-nomenon with its scale and speed, it presents myriad opportunities, which consumers have been quick and enthusiastic to grasp. Business-es, particularly small and medium enterprises (SMEs)the growth en-gine of most economieshave been uneven in their uptake, but they are moving online in increasing numbers and with an increasingly in-tense commitment.

There are threats too, some misunderstood, and policymakers and regulators alike are challenged to make the right choices in a fast-moving environment. As is often the case with fast-paced change and

2015

2005

From developed to developing marketsInternet users in the

G-20 countries (millions)

238

508

672

1,390

573

2,134

9662,707total2,062total

746total

16730

Consumer broadbandconnections (millions) Global Internet trac

(exabytes per year)

From fixed to mobile From basic content to adata explosion

Fixed connectionsMobile connections

Developed marketsDeveloping markets

Sources: economist Intelligence Unit; Cisco; Ovum; BCG analysis.Notes: While the european Union is a member of the G-20, the figures include only the independent european members: France, Germany, Italy, and the U.K. The developing nations are argentina, China, India, Indonesia, mexico, Russia, Brazil, saudi arabia, south africa, and Turkey. The developed nations are australia, Canada, France, Germany, Italy, Japan, south Korea, U.K., and U.s.

Exhibit 1 | Evolution of the Internet


complex issues, many governments are still trying to determine what their role should be.

Meanwhile the rice pile on the next square keeps getting bigger.

This report assesses the far-reaching economic impact of the Internet. It shows how the benefits are large and getting larger, identifies the drivers behind them, and examines their clout. It quantifies gainseconomic growth, consumer value, and jobsin the context of the economies of the G-20. It demonstrates that no oneindividual, busi-ness, or governmentcan afford to ignore the ability of the Internet to deliver more value and wealth to more consumers and citizens more broadly than any economic development since the Industrial Revolution.

Note1. The Group of 20 major economies comprises Argentina, Australia, Brazil, Canada, China, the EU, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the U.K., and the U.S.


ThE InTErnETs EconomIc ImpacT

The economic impact of the Internet is getting biggerjust about everywhereand it already has an enormous base. In the U.K., for example, the Internets contribution to 2010 GDP is more than that of construc-tion and education. In the U.S., it exceeds the federal governments percentage of GDP. The Internet economy would rank among the top six industry sectors in China and South Korea.

Policymakers in developed countries cite with envy the GDP growth rates of 5 to 10 percent per year being achieved in China and India, particularly in todays troubled economic en-vironment. At the same time, they can often look past similar, or even higher, rates close to home.

The Internet economy in the developed mar-kets of the G-20 will grow at an annual rate of 8 percent over the next five years, far out-pacing just about every traditional economic sector, producing both wealth and jobs. The contribution to GDP will rise to 5.7 percent in the EU and 5.3 percent for the G-20. Growth rates will be more than twice as fastan average annual rate of 18 percentin developing markets, some of which are banking on a digital future with big invest-ments in broadband infrastructure. Overall, the Internet economy of the G-20 will nearly double between 2010 and 2016, when it will employ 32 million more people than it does today.

The growth is being fueled in large part by two factors: more users and faster, more ubiq-uitous access. The number of users around the globe will rise to a projected 3 billion in 2016 from 1.9 billion in 2010. Broadening ac-cess, particularly via smartphones and other mobile devices, and the popularity of social media are further compounding the Inter-nets impact. In the developing world in par-ticular, many consumers are going straight to social. (See Exhibit 2.)

The internet economy of the G-20 will nearly double between 2010 and 2016.

National levels of Internet economic activity generally track the BCG e-Intensity Index, which measures each countrys level of en-ablement (the amount of Internet infrastruc-ture that it has in place), expenditure (the amount of money spent on online retail and online advertising), and engagement (the de-gree to which businesses, governments, and consumers are involved with the Internet). Big differences are apparent among the 50 countries examined, with five clusters emerg-ing according to their performance on the in-dex in absolute terms and relative to per cap-ita GDP. (See Exhibit 3.)


Social mainstreamand mature

Straightto social

Focus ontraditional

Web

100

80

90

60

70

50

020 40 1008060

Social networking penetration among Internet users (%)

Internet penetration (%)

South Africa

India Indonesia

Argentina

Mexico Turkey

BrazilAustralia

FranceU.K.

Canada

U.S.

South KoreaChinese social networkgrowth is exploding

Social networking is strongamong the connected elite

Japan is experiencingdramatic social growth

Heavy users ofmore traditionalconversationalmediaJapan

Germany

Italy

China

Russia

Size of Internetpopulation = 50 million

Sources: economist Intelligence Unit; comscore; Google; Trendstream; emarketer; local telco reports; BCG analysis.Note: Data reflect 2011 figures; where unavailable, 2010 figures were used; saudi arabia not included.

Exhibit 2 | Developing Markets Are Going Straight to Social Users Are Adopting Social Networking Quickly as They Come Online

200

150

100

50

020 40 60 80

BCG e-Intensity score

South Korea

U.K.Iceland

Japan

Hong Kong

DenmarkSwedenNetherlands

2010 GDP per capita ($thousands)

Norway

LuxembourgSwitzerlandAustralia

CanadaIreland

United Arab EmiratesItaly

Greece

Saudi Arabia

SloveniaCzech Republic

PortugalEstonia

Poland

SlovakiaHungary

AustriaBelgium

Singapore

U.S.Finland

Germany

New Zealand

Spain

Israel

France

MalaysiaChile

BrazilRussia

Turkey

VenezuelaMexico

South Africa

ArgentinaColombiaChina

Morocco

IndiaEgypt

IndonesiaNativesNascent

nativesPlayers AspirantsLaggards

Sources: economist Intelligence Unit; International monetary Fund, ITU; speedtest.net; Gartner; Ovum; World Bank; Pyramid Research; United Nations; World economic Forum; comscore; magnaglobal; euromonitor; BCG analysis.Note: The scores of several countries are estimates based on incomplete data.

Exhibit 3 | Developed Markets Score Significantly Higher in BCGs e-Intensity Index


Consumption is the principal driver of Inter-net GDP in most countries, typically repre-senting more than 50 percent of the total in 2010. It will remain the largest single driver through 2016. Investment, mainly in infra-structure, accounts for a higher portion of the total in aspirant nations as they are in the earlier stages of development.

Several natives on BCGs e-Intensity In-dexthe U.K., South Korea, and Japanare among those nations with the largest Internet contributions to GDP. China and India stand out for their enormous Internet-related ex-portsChina in goods, India in serviceswhich propel their Internet-economy rank-ings toward the top of the chart. Mexico and South Korea have also developed significant Internet export sectors.

Among G-20 players, the United States ben-efits from a vibrant Internet economy, while Germany and France tend to lag. The picture will change by 2016 as, for example, the In-ternet economies of India and the EU-27 grow rapidly to move into the top five. (See Exhibits 4 and 5.)

Retail represents almost one-third of total GDP in the G-20, and online retail contributes a significant and increasing share in many countries. (See Exhibit 6.) Nowhere is the im-pact more apparent than in the U.K. Thanks in part to high Internet penetration, efficient delivery infrastructure, a competitive retail market, and high credit-card usage, the U.K. has become a nation of digital shopkeepers, to paraphrase Adam Smith.

Several European economiesDenmark, the Netherlands, Sweden, and the U.K.to name but fourperform strongly on BCGs e-Inten-sity Index. But various barriers hold back the EU as a whole, the worlds biggest single mar-ket, when it comes to cross-border e-com-merce. In January, the European Commission announced plans to catch up, removing these impediments and creating a digital single market. The commission believes that e-commerce can double its share of overall re-tail sales by 2015.

GDP(%)

GDP($trillions)

U.K.South Korea

ChinaJapan

U.S.G-20India

EU-27AustraliaGermanyCanadaFranceMexicoBrazil

Saudi ArabiaItaly

ArgentinaSouth Africa

RussiaTurkey

Indonesia

2.31.05.95.5

1.7

1.23.31.62.61.02.10.42.10.40.41.50.70.7

8.37.3

5.5

4.74.3

4.7

4.14.1

3.83.3

3.03.0

2.92.5

2.22.2

2.12.0

1.91.9

1.71.3 Natives Players AspirantsLaggards

Internet economy as a percentage of 2010 GDP

Developed market average

3.6 Developing market average

14.554.9

16.2

Sources: economist Intelligence Unit; Organisation for economic Co-operation and Development (OeCD); country statistical agencies; BCG analysis.

Exhibit 4 | The Internet Currently Accounts for 4.1% of GDP in the G-20 Countries


Online retail as a percentage of total retail, 2016Onlineretail

(%)

U.K.GermanyAustralia

South KoreaSaudi Arabia

ItalyU.S.

JapanFrance

G-20Canada

IndiaBrazilChina

RussiaArgentina

MexicoSouth Africa

TurkeyIndonesia

23.011.7

8.98.18.08.0

7.16.86.7

5.34.54.3

3.43.2

2.91.61.5

1.10.3

6.0

Natives Players AspirantsLaggards

Developed market average

Developing market average

1

8.5

3.22

Sources: economist Intelligence Unit; Organisation for economic Co-operation and Development (OeCD); country stastical agencies; BCG analysis. 1This figure does not include the eU-27.2This figure reflects business-to-consumer retail only.

Exhibit 6 | Online Retail Is Expected to Account for Up to 23% of Total U.K. Retail in 2016

Internet economy as a percentage of 2016 GDP

U.K.South Korea

ChinaEU-27India

JapanU.S.

G-20Mexico

GermanySaudi Arabia

AustraliaCanada

ItalyFrance

ArgentinaRussia

South AfricaBrazilTurkey

Indonesia NativesPlayers AspirantsLaggards

Developed market average5.5

Developing market average4.9

12.48.0

6.9

5.65.6

5.45.3

4.2

3.8

3.63.53.43.3

2.82.52.42.3

1.5

4.0

5.7

3.7

GDP(%)

GDP($trillions)

2.8 1.4 12.4 20.0 4.3 6.6 18.6 79.9 1.5 3.9 0.8 1.7 2.1 2.4 3.1 0.8 2.7 0.6 3.7 1.3 1.5

10.9 7.4 17.4 10.6 23.0 6.3 6.5 10.8 15.6 7.8 19.5 7.1 7.4 11.5 6.1 24.3 18.3 12.6 11.8 16.5 16.6

CAGR 201016

(%)

Source: economist Intelligence Unit; Organisation for economic Co-operation and Development (OeCD); country stastical agencies; BCG analysis.

Exhibit 5 | The Internet Economy Will Account for 5.3% of GDP in the G-20 Countries in 2016


ThE InTErnETs FUrThEr EconomIc ImpacT

As significant as the GDP figures are, they capture only part of the story. In retail alone, G-20 consumers researched online and then purchased offline (ROPO) more than $1.3 trillion in goods in 2010the equivalent of about 7.8 percent of consumer spending, or more than $900 per connected consumer.

ROPO is a bigger factor in developed econo-mies, as one would expect, but consumers ev-erywhere research a wide variety of products online before purchasing them elsewhere. In China, groceries are a popular ROPO pur-chase; in the United States, cars; India, tech-nology products; Brazil, electronics, applianc-es, and travel packages. Multiple factors affect e-commerce and ROPO. In addition to regula-tory barriers like those cited above, the state of infrastructure for online and bricks-and-mortar retail plays a big role, as do Internet penetration, credit-card use, and consumer confidence in online payment systems, deliv-ery, and fulfillment.

ROPO spending is higher than online retail in virtually all the nations we studied. (See Ex-hibit 7.) In the U.S., online retail sales totaled $252 billion in 2010, and ROPO added anoth-er $482 billion. ROPO dwarfs online retail in Turkey$37 billion compared with $2 bil-lionowing in large part to poor delivery in-frastructure and consumer concern over ful-fillment. In Mexico, although low credit-card

penetration and security concerns over on-line payments hold back online commerce, Mexican consumers without credit cards can pay for their online purchases at 7-Eleven stores. Like the U.S., Japan has a busy online retail market, which totaled $89 billion in 2010. ROPO added $139 billion because Japanese consumers still prefer the experi-ence of shopping in stores. Across the G-20, ROPO would add an additional 2.7 percent if it were counted as part of Internet GDP.

Consumers everywhere research a wide variety of products online before pur-chasing them elsewhere.

Mobile shoppingusing a smartphone to identify deals, compare products and prices, and seal the deal while on the gois grow-ing in popularity worldwide. As device prices fall, especially in developing markets, in-creased smartphone penetration will have a dramatic impact on both retail commerce and e-commercefurther blurring the lines between online and offline buying. Mobile apps such as RedLaser, Google Shopper, and Amazon Remembers make it ever easier for consumers to research products, compare deals, and make purchases as they see fit at


any given moment. Retailers of all stripes face an especially fast-changing and increas-ingly competitive environment in the years ahead. With the rapid growth of e-commerce and its potential to disrupt both the top and bottom lines, retail may be ripe for a transfor-mation similar to the one seen in media. A multichannel offering that captures sales wherever they occur will become a must have for most businesses.

Online advertising, a $65 billion business in the G-20 in 2010, is forecast to grow 12 per-cent a year to almost $125 billion in 2016. In countries with more developed Internet econ-omies, 15 to 30 percent of advertising spend-ing has migrated online. Online advertising spending in the U.K. overtook spending on television advertising in 2011and it now exceeds spending on all other media cate-gories.

Consumer-to-consumer Internet commerce is a big factor in China, facilitated by websites such as Taobao, a marketplace for goods of all sorts. More products were purchased on

Taobao in 2010 than at Chinas top-five brick-and-mortar retailers combined.

The Internet is having a big impact on how enterprises do business and interact with one another, too. Cloud-based data storage, inte-grated procurement systems, and enterprise social networks that facilitate communica-tion within and among organizations in real time are helping companies address a host of procurement, coordination, communication, and fragmentation issues. With spending in the $3 trillion range, both the U.S. and Japan lead the world in business-to-business e-com-merce, but penetration is picking up in other countries. South Koreas percentage of busi-ness-to-business e-commerce is approaching 50 percent, as is Japans.

U.S.Japan

U.K.Germany

ChinaFrance

CanadaItaly

South KoreaAustralia

RussiaTurkeyBrazil

MexicoIndia

ArgentinaSaudi ArabiaSouth Africa

IndonesiaOnline retail($billions)

ROPO($billions)2

73422889 139

189102 8712638 88

10610 9610527 78

7618 586820 486723 44

5820 384512 33402 373415 19

292 27137 6

112 983 542 210 1

482252

Value($)

Online retail and ROPO (research online, purchase oine), 2010

Sources: euromonitor; Google-TNs; BCG analysis.Note: Figures exclude real estate for some countries; the figures for online retail and ROPO do not add up to the total due to rounding.1This figure reflects business-to-consumer retail only. 2Total ROPO (auto and nonauto).

Exhibit 7 | ROPO Greatly Amplifies the Internets Impact on Retail


Consumers (everywhere) Know a Good deal when ThEy sEE IT

Connected consumers place a consid-erable value on the Internet. In the G-20 economies, this consumer surplusthe perceived value that consumers themselves believe they receive, over and above what they pay for devices, applications, services, and accessamounts to $1,430 a person.1 Consumer surplus varies vastly across countries, depending in part on the impact of the drivers shaping each nations Internet economy. For example, its $323 per person in Turkey, $1,215 in South Africa, $1,287 in Brazil, and $4,453 in France. The aggregate consumer surplus across 13 of the G-20 countries is $1.9 trillion, or about 4.4 percent of the GDP.

It is interesting to note that in countries such as France and Germany, which have relative-ly low levels of Internet GDP, consumers per-ceived value of the Internet is very high. Fur-thermore, although the consumer surplus figures are lower for many developing mar-kets, they are actually quite high relative to local incomeslower-income people get rela-tively more benefit from the Internet than wealthier people do. Closing the digital di-vide can have a meaningful impact for the less well-off.

Consumer surplus has multiple drivers, among them the quality of online content, the number of devices in use, the ease and fre-quency of access, and the number of people

online. Demographics play a role in the last factor: in many markets, the heaviest users of the Internet are the youngno surprise thereand those over 55, whose ranks will swell as the population ages. (See Exhibit 8.) All these factors are on the rise, which points to continued growth in the consumer surplus.

Various aspects of consumer surplus are illus-trated in the country profiles at the end of this report. These profiles also show the In-ternets impact on GDP and on the retail market in each country. Most significantly, they highlight how deeply the Internet has ingrained itself in daily life around the world, by showing what consumers are willing to give upfrom satellite navigation to sexin order to keep their Internet access.

Note1. In our analysis, we took into consideration the value derived from communication, content (entertainment, news, and social media), search, commerce, and job searches. We used a loss aversion technique to avoid anchoring the data to the current prices of goods and servicesmany of which are freeand to determine the true value that people place on them. To measure consumer surplus, we subtracted from this value what people currently pay to access the Internet and the cost of the devices, content, and applications. Our analysis found that consumers receive a surplus equal to about 80 percent of value, or 4 to 5 percent of personal income.


Perceived Internet value per user

4,000

3,000

2,000

1,000

0

($)

2,9261,953

1,456

3,2262,722 2,478

3,060

1,807

782494

936

2,130

24 24 22 22

55

2,363

3,506

3,7012,978

2,3243,062

5,174 316244

172 158 178

1824 2534 3544 4554 55+

1824 2534 3544 4554 55+

1824 2534 3544 4554 55+

1824 2534 3544 4554 55+

1824 25341 3544 4554 55+

1824 2534 3544 4554 55+Age categories

6,000

4,000

2,000

0

()

400

300

200

100

0

(thousands)

4,000

3,000

2,000

1,000

0

()

3,000

2,000

1,000

0

(KRWthousands)

60

40

20

0

(Rp thousands)

USA France Japan

Germany South Korea India

2,578

Source: BCG survey.Note: Value comparisons are weighted by income (excluding the highest and lowest levels by country) to minimize bias. 1The figure for Japans 2534 category is estimated (base size).

Exhibit 8 | Youngest and Oldest Consumers Tend to Value the Internet the Most


From hiGh-web to no-webopporTuniTies for small and medium enTerprises

Given their agility and ability to innovate, one would expect SMEslong the engine of economic growth in many economiesto grasp the power of the Internet to build their businesses. Indeed, many have, and these companies have helped turned the Web into an important vehicle for revenue growth and job creation. But a surprising number have notor have ven-tured online only to a limited extent. These companies are leaving an enormous opportu-nity untapped.

In our view, every business needs to go digitaland fast. Policymakers, too, should pay heed. Given SMEs track record in job cre-ation, policies that encourage more of these companies to develop an online presence could help address the lingering unemploy-ment that currently characterizes the recov-ery in many countries.

Over the last 18 months, BCG has surveyed workers at more than 15,000 companies that operate in the worlds biggest economies and that employ fewer than 250 people (in the U.S., the cutoff was 500). We grouped the companies into four categories: high-Web, medium-Web, low-Web, and no-Web.1

The results are compelling. Across 11 of the G-20 countries, high-Web SMEs have experi-enced revenue growth that was up to 22 per-cent higher than that achieved by SMEs with

low or no use of the Web over the last three years. (See Exhibit 9). In the U.K., sales at high-Web companies increased six times as fast as revenues at firms with no Internet presence.

Many U.S. SMEs have integrated the Internet into their businesses. They are much more aggressive online than low-Web companies, particularly in activities such as search en-gine optimization, social networking, buying from and paying suppliers. They are even managing their business finances and recruit-ing staff online.

In many developed and developing markets, high-Web companies are twice as likely as their low- or no-Web counterparts to have a national and international customer base, as opposed to selling only locally. In the U.S., high- and medium-Web businesses expect to grow by 17 percent over the next three years, compared with 12 percent for low- and no-Web companies.

High- and medium-Web SMEs generate more jobs. In Germany, 93 percent of high-Web and 82 percent of medium-Web compa-nies increased employment over the past three years, compared with only 50 percent of the no-Web firms. Japan experienced simi-lar results. In South Korea, employment in-creased at 94 percent of high-Web SMEs and at 60 percent of no-Web companies.


Weve identified five value levers that explain the Internet advantage of High-Web SMEs:

Geographic Expansion. The Internet creates a borderless world for many SMEs, enabling them to compete with much larger, multinational companies by accessing markets that were previously out of reach.

Enhanced Marketing. Online marketing delivers expanded reach and measurable returns. It also yields valuable data about consumers and their preferences, enabling expressly targeted advertising and offers.

Improved Customer Interactions. Social media make it possible for companies to engage in real-time dialog with customers not only to boost sales but also to build loyalty and even to help create, refine, and enhance products and services.

Leveraging the Cloud. SMEs can access sophisticated, often cloud-based, tools to

enhance a wide range of functions, including customer relationship manage-ment, information management, and customer payments. As a result, these companies can grow quickly without requiring large investments in infrastructure.

Easier and Quicker Staff Recruitment. The recruiting options available today are more powerful and less expensive than ever before, and they enable SMEs to tap a global talent market.

The most powerful lever may be improved customer interaction, which is achieved prin-cipally by exploiting the participatory nature of todays Internet. Nearly two-thirds of high-Web SMEs are moving quickly to match their customers engagement in social networks. The impact can be seen in such developing markets as Brazil and China. (See Exhibit 10.) Despite high barriers impeding SME adoption of online activities (e.g., lack of infrastructure and computer penetration), these countries

Brazil Turkey

Germany U.S. France

Historical three-year sales growth

South KoreaSouth Korea

India30

20

10

0

30

20

10

0

China

High-Web SMEs Low-Web and No-Web SMEs

25

1810 10

6

2012 13

1917

15 8 5

15

(%)

(%)

9

4

14

5

22

5

3

7

5

11

1 1Source: survey of approximately 4,700 smes; BCG analysis. Note: Figures for some countries may not add up to the totals due to rounding.1High-Web companies use a wide range of Internet tools to market, sell, and support customers, interact with suppliers, and empower employees; medium-Web businesses market or sell goods or services online; low-Web businesses have a website or a social-networking site; no-Web businesses do not have a website.

Exhibit 9 | SMEs That Make Extensive Use of the Web Grow Faster


not only boast higher percentages of high-Web SMEs than their developed-market counterparts, but their SMEs are also substan-tially more adept at moving beyond Internet marketing to exploit the Webs facility for driving sales through more intensive custom-er interaction.

The barriers keeping SMEs from engaging more broadly or deeply online fall into five general categories: poor access to the requi-site technology, lack of capabilities, lack of re-sources, doubt over the potential returns, and an unfavorable business environment. Not surprisingly, access problems and an unfavor-able business environment were cited far more often by SMEs in developing markets than by their developed-market counterparts. Almost half of SMEs in India and Indonesia cited local business culture as a significant impediment; one-third of Chinese SMEs said that they are held back by lack of access to computers. Inadequate staff knowledge and time were named the biggest barriers in Ja-pan, and about one-quarter of U.S. and U.K. firms reported a lack of necessary financial resources.

Most of these barriers must be hurdled by the SMEs themselves. But policymakers should take note that access issues and government regulations were cited as impediments by one in five SMEs in developed marketsand by two in five in developing economies. These are areas where governments may have opportunities to lend a hand and can reap the benefits of increased economic growth and job creation.

Note1. High-Web companies use a wide range of Internet tools to market, sell, and support customers, interact with suppliers, and empower employees; medium-Web businesses market or sell goods or services online; low-Web businesses have a website or a social network-ing site; no-Web businesses do not have a website.

Brazil and China have higher percentages ofHigh-Web SMEs...Percentage of SMEs by Web involvement Percentage of SMEs using Internet activity to engage consumers

...and generally higher percentages of SMEs engaging consumers online

Website

Onlineadvertising

Blogging

Socialnetworking

E-commerce

China

Brazil

U.K. 23 7 54 16

27 8 36 29

35 8 30 27

No-Web Low-Web Medium-Web High-Web Brazil China U.K.

72

5351

71

7161

22

4138

39

5643

49

6657

Sources: survey of approximately 1,500 smes; IDC; Organisation for economic Co-operation and Development (OeCD); Brazilian Internet steering Committee; China Network Information Centre; Internet & mobile association of India; Zinnov; maRs Indonesia.Note: Values were adjusted for Internet penetration rates in each country and weighted to reflect an equal distribution of company sizes.

Exhibit 10 | More SMEs in Developing Markets Are Using the Internet to Engage with Consumers


dont blinKThe fuTure is rushinG sTraiGhT aT us

The Internet will change even more in the next five years than it has in its first twenty-five. It will have more users (especial-ly in developing markets), more mobile users, more users using various devices throughout the day, and many more people engaged in an increasingly participatory medium. On the second half of the chessboard, as the rice pile starts to rival Mount Everest in magnitude (the size it would reach on the sixty-fourth square), the rapidly evolving Internet has the potential to both enrich and overwhelm.

Businesses in particular need to make a choice. They can rise to the challenge of a new Internet-driven marketplaceand ben-efit from the expanded capabilities and high-er growth rates that high-Web SMEs are al-ready achieving throughout the G-20 nations. The alternative is following in the footsteps of such industries as music and publishing, which held on to outdated business models for too long and are now dealing with com-petitive environments that have been re-shaped around them.

For those willing to think big, embrace change, move quickly, and organize different-ly, there are countless opportunities to reap the rewards of the Internets creative destruc- tion (as defined by economist Joseph Schum-peter rather than by Karl Marx) in industries ranging from health care to retail and con-sumer goods.

Companies that have not yet developed an online strategy for themselves need to build their digital assets while reducing digital lia-bilities (which are often organizational) that might prevent them from tapping opportuni-ties. This topic will be the subject of the next forthcoming report in BCGs Connected World series.

Governments also face challenges and oppor-tunitiesand many of these are increasingly complex. Fifteen years ago, as the commercial Internet was beginning to make its potential apparent in the U.S. and elsewhere, President Bill Clinton outlined five principles constitut-ing a framework for global electronic com-merce:

The private sector should lead.1.

Governments should avoid undue restric-2. tions on electronic commerce.

Where governmental involvement is 3. needed, its aim should be to support and enforce a predictable, minimalist, consis-tent, and simple legal environment for commerce.

Governments should recognize the unique 4. qualities of the Internet.

Electronic commerce on the Internet 5. should be facilitated on a global basis.


Country ProFiles

In this section, we feature a series of detailed profiles illustrating Internet economic activity across the G-20. For each economy, we have provided information on the impact of the Internet on commerce and

GDP, an illustration of how consumers are using the Internet and what they value, and an assessment of use byand impact onsmall and medium enterprises.

The Internet is a very different, much bigger, and more complex place now than it was then. New, important, and difficult issues have moved to the fore, among them privacy, piracy, protection, security, net neutrality, and taxation. They are already causing con-flict and contention as different players with distinct interests choose sides. The recent de-bate over SOPAthe proposed Stop Online Piracy Actin the U.S. is one example of how fractious such issues can be. In February, street protests in several European cities against an antipiracy agreement seen as lim-iting the freedom of online speech showed that citizens are paying attention and have strongly held points of view.

In the best of all worlds, with the Internet be-ing a global phenomenon, governments would act in a coordinated manner, working toward international standards when they are called for and toward cross-country agree-ments to limit intervention when it is better to let the free market do its own work. This is a high bar, to be sure, and we may need an updated framework with some new princi-ples, but those put forth by President Clinton offer a still-valid structure for engaging the debate.

On a national level, policies that promote in-vestmentespecially in the infrastructure in the developing worldand emphasize educa-tion, training, and skills-building everywhere are essential. Perhaps even more than the in-dustrial era and information age, the Internet economy requires a well-educated and skilled workforce. Countries that fall behind in pro-viding educational opportunity are also likely to lose out to others in Internet-driven eco-nomic growth.

Policies that promote invest-ment and emphasize educa-tion, training, and skills-build-ing are essential.

Different countries will take different ap-proaches, but the overarching challenge fac-ing those empowered to do the peoples busi-ness is the sameensure ready and affordable access, a level playing field, and an open competitive environment that enables everyone to tap the economic benefits of the Internet.


2016

Research online,purchase oine

2010

$568per

onlineuser

Television Newspaper Out-of-home Online Online

Percentage of total advertising expenditures in 2010

7.7 10.0

$0.3 $1.9billionbillion

$9billion

(5.9% oftotal retail)

45.8 32.2

6.7

Radio

3.1

Magazine

4.5

20162010

Totalretail

Onlineretail

$2billion(1.4%)

$9billion(2.9%)

40.0%CAGR

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; INDeC; CaCe; IemR; company reports; World Bank; World Trade Organization; amricaeconoma; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in Argentina

Argentina

3.3

2016

2010

Consumption

Investment

Net exports

Percentage of GDP

3

8

TOTAL28

18

--3--1

5

Governmentspending

5

2

Argentina

G-20 G-20

Comparison of Internet economy with traditional industry sectors (percentage of GDP)

2.0

Internet

Public administration

ManufacturingWholesale and retail trade

Real estateAgriculture, forestry, and hunting

Education and health servicesLogistics and communication

Financial transactions Construction

Community services

Mining Hotels and restaurants Utilities

Fishing

5.34.1

2.0

GDP contribution ($billions)

TOTAL8

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; INDeC; CaCe; IemR; company reports; World Bank; World Trade Organization; amricaeconoma; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Argentinas Internet Economy


4.5

2016


2010

$2,302

16.4%CAGR

peronlineuser

Television Newspaper Online Online


18.434.0

$2.1$5.3billion

billion

$38billion


31.5 30.2

Out-of-homeRadio

7.9

Magazine

7.5

20162010

Totalretail

Onlineretail

$20billion(5.8%)

$38billion(8.9%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; australian Bureau of statistics; Forrester Research; IemR; australian Communications and media authority; company reports; National Broadband Network; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in Australia

Australia

3.7

20162010

Consumption

Investment

Net exports

Percentage of GDP

15

917

TOTAL61

TOTAL41

50

--19

29

12

Governmentspending 14

Australia

G-20 G-20

3.3


3.3

Internet

Health care

Real estateFinancial servicesand insurance

Wholesale and retail tradeManufacturing

Mining

Professional, scientific, and technical services

LogisticsPublic administration

Education and trainingInformation and telecommunications Administration

Agriculture

Construction

Hotels and restaurants

UtilitiesArts, entertainment, and recreation

5.34.1


Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; australian Bureau of statistics; Forrester Research; IemR; australian Communications and media authority; company reports; National Broadband Network; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Australias Internet Economy



2010

$260per

onlineuser

Television Newspaper Out-of-homeRadioMagazine Online Online


15.6

$1.7

201617.4

$3.7billionbillion

$19billion


60.3

10.12.9

3.5

7.5

20162010

Totalretail

Onlineretail

$15

14.2%CAGR

billion(3.1%)

$36billion(4.3%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Brazilian Census Bureau (IBGe); eC; ImRG; ITU, U.K. Office for National statistics (ONs); Ie market Research; CeTIC; Teleco; CGI/ICT; Faraban; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in Brazil

2.4Brazil

2016

2010

Consumption

Investment

Net exports

Percentage of GDP

14

21

TOTAL89

TOTAL46

76

--16

34

Governmentspending

8

4

Brazil

G-20 G-20

2.2



Manufacturing

Public and personalservices

Real estate and businessservices

Logistics

Wholesale and retail trade,hotels, and restaurants

Agriculture

Mining

Construction

Financial services and insurance

Electricity, gas, and water

5.34.1


--6

2.2

Internet

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Brazilian Census Bureau (IBGe); eC; ImRG; ITU, U.K. Office for National statistics (ONs); Ie market Research; CeTIC; Teleco; CGI/ICT; Faraban; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Brazils Internet Economy


53

SMEs percentage ofprivate-sectoremployment

SMEs percentage of GDP

Percentage of SMEs that addedjobs during the last three years

20

Historical three-year sales growthof SMEs (percentage) 1 1

Website Onlineadvertising

Searchengine

optimization

Blogging Socialnetworking

E-commerce Recruitment Finance Payingsuppliers

High-WebLow-Web

E-procurement

100

3

100 100 10038 50

70 5486 74 7326 3 6024 1 0 3 3

Intensity of Web usage (percentage of SMEs using the Internet for a business activity)

20

6

12

High-Web

Medium-WebLow-Web and

No-Web

20

6

12

High-Web

dium-Weband

Low-Web andNo-Web

77

Medium-Web

95

High-Web

98

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Brazilian Census Bureau (IBGe); eC; ImRG; ITU, U.K. Office for National statistics (ONs); Ie market Research; CeTIC; Teleco; CGI/ICT; Faraban; BCG analysis. 1High-Web companies use a wide range of Internet tools to market, sell, and support customers, interact with suppliers, and empower employees; medium-Web businesses market or sell goods or services online; low-Web businesses have a website or a social-networking site; no-Web businesses do not have a website.

The Internets Impact on Small and Medium Enterprises (SMEs) in Brazil

Percentage of people willing to give up a key lifestyle habit instead of the Internet for a year

E-mail

General search

Online bankingand investing

What doconsumers

value?

$1,472

Satellitenavigation

78Alcohol76

Fast food72

Chocolate59

Coee60

Exercise43

Car24

Sex12

Shower8

Annual value

$131

$152$1,287Consumer

surplus

$154

Perceivedvalue

Cost$185

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Brazilian Census Bureau (IBGe); eC; ImRG; ITU, U.K. Office for National statistics (ONs); Ie market Research; CeTIC; Teleco; CGI/ICT; Faraban; BCG analysis.Note: Due to rounding, perceived value does not total consumer surplus plus cost.

Brazils Consumers Benefit from the Internet


2016


2010

$2,082

10.6%CAGR

peronlineuser

Online Online


20.0

$2.1billion

$58billion


Television

32.6

Newspaper

21.8

Out-of-home

5.3

Radio

14.7

Magazine

5.5

20162010

Totalretail

Onlineretail

$18billion(3.4%)

$33billion(5.3%)

28.8

$3.8billion

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; emarketer; statistics Canada; Retail Council of Canada; Industry Canada; aXCO; IemR; H2; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in Canada

Canada3.6

20162010

Consumption

Investment

Net exports

Percentage of GDP

22

29

TOTAL73

TOTAL48

51

--20--12

27

13

11

Canada

G-20 G-20

3.0


3.0

Internet

Education services

Financial services,insurance, and real estate

ManufacturingWholesale and retail trade

Health care and social servicesPublic administrationConstruction

Professional, scientific, and technical servicesLogisticsMining, oil, and gas extraction

Information and cultural industriesAdministrative and supportUtilitiesHotels and restaurantsAgriculture, forestry, and fishing

Arts, entertainment, and recreation

5.34.1

GDP contribution ($billions) Government

spending

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; emarketer; statistics Canada; Retail Council of Canada; Industry Canada; aXCO; IemR; H2; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Canadas Internet Economy


2016


2010

$213per

onlineuser

Television Newspaper Out-of-home Radio Magazine Online Online


11.9 18.0


$96billion


45.825.4

7.9

6.62.4

25.1%CAGR

20162010

Total retail

Onlineretail (B2C)

$10

Onlineretail (C2C)

billion(0.4%)

$62billion(2.5%)

$176billion(3.4%) $246billion

(4.7%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Chinese government; iResearch; China Information almanac; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in China

6.95.3

5.54.1

China

2016

2010

ConsumptionInvestment

Net exports

Percentage of GDP

55

92

TOTAL852

TOTAL326

321

412

12

62

197

Governmentspending

27

China

G-20 G-20


5.5

Internet

Leasing and business services

Public and social organizations

Manufacturing

Logistics

Information and communications technology (ICT)

Financial intermediation

Wholesale and retailAgriculture, forestry, and fishing

Real estate

Construction

Education



Health care, social security, and social servicesServices to householdsScientific research and technical servicesArts, entertainment, and recreation

Mining


Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Chinese government; iResearch; China Information almanac; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Chinas Internet Economy


SMEs percentage ofemployment



Historical three-year sales growth of SMEs (percentage)1 1


Searchengine

optimization



High-WebLow-Web

E-procurement

10012

100 100 10064 62 59 6476 77 893 0

4612 6 3 0 3


59 8025

20

9

High-Web


No-Web

25

20

9

High-Web

dium-Weband

Low-Web andNo-Web

91

Medium-Web

90

High-Web

97

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Chinese government; iResearch; China Information almanac; BCG analysis.1High-Web companies use a wide range of Internet tools to market, sell, and support customers, interact with suppliers, and empower employees; medium-Web businesses market or sell goods or services online; low-Web businesses have a website or a social-networking site; no-Web businesses do not have a website. 2This percentage reflects fewer than 10 responses from no-Web smes.

The Internets Impact on Small and Medium Enterprises (SMEs) in China


Online shopping

What doconsumers

value?

$598

Fast food78

Chocolate82

Car56

Annual value

Satellitenavigation

79Coee85

Alcohol86

Exercise45

Shower37

Sex36

$46

$451Consumer

surplus

$47

Perceivedvalue

Cost$147

Instant messaging


$53

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Chinese government; iResearch; China Information almanac; BCG analysis.

Chinas Consumers Benefit from the Internet


2016


2010

$1,682per

onlineuser

Television Newspaper Out-of-home RadioMagazine Online Online


15.3 19.7


$78billion


32.219.4

11.1

7.0

15.1

20162010

Totalretail

Onlineretail

$27

5.6%CAGR

billion(4.5%)

$46billion(6.7%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; eC; H2; Ie market Research; IDs; INsee; company reports; eurostat; Forrester Research; aXCO; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in France

3.4

France

2016

2010Investment

Net exports

Percentage of GDP

28

33

TOTAL105

TOTAL73

67

--12--10

42

Governmentspending

Consumption

16

14

France

G-20 G-20

2.9


2.9

Internet


Manufacturing

Logistics

Wholesale and retail trade

Agriculture

Real estate

Construction

Financial servicesEducation


Food, beverages, and tobacco

Health care and social services

MetalsUtilities

5.34.1


Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; eC; H2; Ie market Research; IDs; INsee; company reports; eurostat; Forrester Research; aXCO; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Frances Internet Economy


56


SMEs percentage ofprivate-sector turnover


60

Historical three-year sales growth of SMEs (percentage)1 1


Searchengine

optimization



High-WebLow-Web

E-procurement

10043

100 100 10049 38 61 3849

78 638 7 324 9 5 10 5


10

6

7

High-Web


No-Web

10

6

7

High-Web

dium-Weband

Low-Web andNo-Web

65

Medium-Web

87

High-Web

96

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; eC; H2; Ie market Research; IDs; INsee; company reports; eurostat; Forrester Research; aXCO; BCG analysis.1High-Web companies use a wide range of Internet tools to market, sell, and support customers, interact with suppliers, and empower employees; medium-Web businesses market or sell goods or services online; low-Web businesses have a website or a social-networking site; no-Web businesses do not have a website.

The Internets Impact on Small and Medium Enterprises (SMEs) in France

E-mail

General search


What doconsumers

value?

$4,788

Fast food86

Car23

Annual value

$420

Satellitenavigation

77Coee61

Alcohol69

Chocolate66

Exercise42


Shower5

Sex16

$4,453Consumer

surplus

$570

Perceivedvalue

Cost$335

$597

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; eC; H2; Ie market Research; IDs; INsee; company reports; eurostat; Forrester Research; aXCO; BCG analysis.

Frances Consumers Benefit from the Internet


Newspaper


2010

$1,330

6.2%CAGR

peronlineuser

Television Out-of-home RadioMagazine Online Online

Percentage of total advertising expenditures in 2010201626.4

$7.1billion

20.7

$5.0billion

$88billion


22.934.3

4.8

4.0

13.3

20162010

Totalretail

Onlineretail

$38billion(7.1%)

$68billion(11.7%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; eC; eurostat; Forrester Research; H2; Ie market Research; aXCO; DB Research; FBs; GfK; IDC; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in Germany

4.0Germany

2016

2010

Consumption

Investment

Net exports

Percentage of GDP

31

39

TOTAL157

TOTAL100

95

8

--5

59

Governmentspending

15

14

Germany

G-20 G-20

3.0


Internet


Manufacturing

Logistics

Health care and social work


Utilities

Real estate

Construction

Financial services

Education


Mining

5.34.1


3.0

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; eC; eurostat; Forrester Research; H2; Ie market Research; aXCO; DB Research; FBs; GfK; IDC; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Germanys Internet Economy



SMEs percentage of private-sector turnover


61

Historical three-year sales growthof SMEs (percentage)1 1


Searchengine

optimization



High-WebLow-Web

E-procurement

100

22

100 100 10050 49 72 3967 75 4512 0

492 73 7 0


5418

8

4

High-Web


No-Web

18

8

4

High-Web

dium-Weband

Low-Web andNo-Web

57

Medium-Web

82

High-Web

93

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; eC; eurostat; Forrester Research; H2; Ie market Research; aXCO; DB Research; FBs; GfK; IDC; BCG analysis.1High-Web companies use a wide range of Internet tools to market, sell, and support customers, interact with suppliers, and empower employees; medium-Web businesses market or sell goods or services online; low-Web businesses have a website or a social-networking site; no-Web businesses do not have a website.

The Internets Impact on Small and Medium Enterprises (SMEs) in Germany



What doconsumers

value?

$3,857

Fast food89

Chocolate70

Coee55

Exercise45

Car23

Sex16

Shower10

Annual value

$362

Satellitenavigation

77Alcohol77

$3,487Consumer

surplus

General search$389

Perceivedvalue

Cost$370

E-mail

$438

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; eC; eurostat; Forrester Research; H2; Ie market Research; aXCO; DB Research; FBs; GfK; IDC; BCG analysis.

Germanys Consumers Benefit from the Internet


3.57.7

2016


2010

$78

25.3%CAGR

peronlineuser

Television Newspaper Out-of-home Radio Magazine Online Online


3.4 4.6


$6billion


41.7 39.8

4.0

20162010

Totalretail

Onlineretail

$7billion(0.9%)

$84billion(4.5%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; H2; Reserve Bank of India; Indian government; Telecom Regulatory authority of India; NassCOm; mediaNama; Trendstream; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in India

India

5.6

2016

2010

ConsumptionInvestment

Net exports

Percentage of GDP

TOTAL242

8

Governmentspending

2

2

India

G-20 G-20

4.1


4.1

Internet

Agricultureforestry, and fishing

Financial services,real estate, insurance, and business services


Manufacturing

Social and personal services

Construction

Mining

Utilities

Logistics and communications

5.34.1


41

1214TOTAL

70

32

11

108

91

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; H2; Reserve Bank of India; Indian government; Telecom Regulatory authority of India; NassCOm; mediaNama; Trendstream; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Indias Internet Economy


25






Searchengine

optimization



High-WebLow-Web

E-procurement

100

5

100 100 10055 51 60 50

86 74 7917 7

7535 3 1 12 1


1719

19

13

High-Web


No-Web

19

19

13

High-Web

dium-Weband

Low-Web andNo-Web

83

Medium-Web

98

High-Web

100

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; H2; Reserve Bank of India; Indian government; Telecom Regulatory authority of India; NassCOm; mediaNama; Trendstream; BCG analysis.1High-Web companies use a wide range of Internet tools to market, sell, and support customers, interact with suppliers, and empower employees; medium-Web businesses market or sell goods or services online; low-Web businesses have a website or a social-networking site; no-Web businesses do not have a website.

The Internets Impact on Small and Medium Enterprises (SMEs) in India


E-mail

General search


What doconsumers

value?

$494

Satellitenavigation

71Alcohol70

Fast food67

Chocolate64

Coee63

Exercise44

Car38

Annual value

$44

Shower36

Sex33

$46$414Consumer

surplus

$48

Perceivedvalue

Cost$80

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; H2; Reserve Bank of India; Indian government; Telecom Regulatory authority of India; NassCOm; mediaNama; Trendstream; BCG analysis.

Indias Consumers Benefit from the Internet


2016


2010

$16

39.3%CAGR

peronlineuser



2.1

$0.2billion

0.6

$0.03billion

$1billion


52.635.1

7.0

0.8

3.9

20162010

Totalretail

Onlineretail

$0.4billion(0.1%)

$2billion(0.3%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; magnaglobal; CCB; aPeC; PTIK; Nielsen; IDC; statistics Indonesia; H2; Indikator TIK 2010; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in Indonesia

Indonesia

1.5

2016

2010

Consumption

Investment

Net exports

Percentage of GDP

5

10

TOTAL22

TOTAL9

13

--2--1

3

Governmentspending

2

1

Indonesia

G-20 G-20

1.3


Internet

Manufacturing

Services

Agriculture

Construction

Financial services, real estate, and business servicesLogistics and communications



Mining

5.34.1


1.3

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; magnaglobal; CCB; aPeC; PTIK; Nielsen; IDC; statistics Indonesia; H2; Indikator TIK 2010; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Indonesias Internet Economy


97






Searchengine

optimization



High-WebLow-Web

E-procurement

100

7

100 100 10060 56 64 6376 79 75

22 1065

16 7 0 3 0


57

16

14

7

High-Web


No-Web

16

14

7

High-Web

ium-Weband

Low-Web andNo-Web

69

Medium-Web

87

High-Web

95

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; magnaglobal; CCB; aPeC; PTIK; Nielsen; IDC; statistics Indonesia; H2; Indikator TIK 2010; BCG analysis.1High-Web companies use a wide range of Internet tools to market, sell, and support customers, interact with suppliers, and empower employees; medium-Web businesses market or sell goods or services online; low-Web businesses have a website or a social-networking site; no-Web businesses do not have a website.

The Internets Impact on Small and Medium Enterprises (SMEs) in Indonesia


E-mail

General search


What doconsumers

value?

$459

Fast food73

Coee75

Car34

Sex34

Annual value

$36

Satellitenavigation

76Alcohol89

Chocolate78

Exercise52

Shower78

$43$364Consumer

surplus

$46

Perceivedvalue

Cost$94

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; magnaglobal; CCB; aPeC; PTIK; Nielsen; IDC; statistics Indonesia; H2; Indikator TIK 2010; BCG analysis.Note: Due to rounding, perceived value does not total consumer surplus plus cost.

Indonesias Consumers Benefit from the Internet


2016


2010

$1,499

20.8%CAGR

peronlineuser

Television Newspaper Out-of-homeRadio Online Online


11.3 26.6

$1.3$3.8billion

billion

$48billion


56.113.3

3.9

5.4

Magazine

10.1

20162010

Totalretail

Onlineretail

$20billion(3.4%)

$50billion(8.0%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Italian National Institute of statistics (Istat); Politecnico di milano (Polimi); Confindustria; Forrester Research; company reports; assinform; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in Italy

Italy

3.5

20162010

Consumption

Investment

Net exports

Percentage of GDP

14

7

TOTAL83

TOTAL43

70

--9

31

Governmentspending

14

7

Italy

G-20 G-20

2.1


2.1

Internet

Education

Travel and tourism

Real estateand business services

Manufacturing


Public administration and defense

Health and social work

Construction

Financial services

Restaurants

Agriculture

Utilities

Logistics

Communications

Mining

5.34.1


--9

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Italian National Institute of statistics (Istat); Politecnico di milano (Polimi); Confindustria; Forrester Research; company reports; assinform; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Italys Internet Economy


2016


2010

$1,387

3.7%CAGR

peronlineuser



26.3

$8.7billion

21.6

$7.0billion

$139billion


50.4

13.88.1

2.04.1

20162010

Totalretail

Onlineretail

$89billion(4.3%)

$158billion(6.8%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Japanese government; IDC; FCR; Nomura Research Institute; Nielson; Japan external Trade Organization ( JeTRO); Dentsu; BCG analysis. Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in Japan

Japan

5.6

20162010

Consumption

Investment

Net exports

Percentage of GDP

80

32

36

88

TOTAL372

TOTAL258

271

--23--16

163

Governmentspending

Japan

G-20 G-20

4.7


4.7

Internet


Manufacturing

Public andpersonal services

Real estate and business servicesWholesale and retail trade,hotels, and restaurants

Agriculture


Construction

Finance and insurance


Mining

5.34.1


Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Japanese government; IDC; FCR; Nomura Research Institute; Nielson; Japan external Trade Organization ( JeTRO); Dentsu; BCG analysis. Note: some columns may not add up to total contributions due to rounding.

Japans Internet Economy


57


SMEs percentage of private-sector turnover


20



Searchengine

optimization



High-WebLow-Web

E-procurement

10057 100 100 100 56

28 56 513168 887 9 1912 17 2 7 2


33 High-Web

Medium-WebLow-Web andNo-Web

Low-Web andNo-Web

54

Medium-Web

73

High-Web

94

4

10

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Japanese government; IDC; FCR; Nomura Research Institute; Nielson; Japan external Trade Organization ( JeTRO); Dentsu; BCG analysis.1High-Web companies use a wide range of Internet tools to market, sell, and support customers, interact with suppliers, and empower employees; medium-Web businesses market or sell goods or services online; low-Web businesses have a website or a social-networking site; no-Web businesses do not have a website.

The Internets Impact on Small and Medium Enterprises (SMEs) in Japan


General search


What doconsumers

value?

$1,446

Satellitenavigation

86Fast food85

Exercise60

Car44

Sex56

Shower17

E-mailAnnual value

$104

Coee74

Alcohol70

Chocolate86

$142$679

Consumersurplus

$148

Perceivedvalue

Cost$767

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Japanese government; IDC; FCR; Nomura Research Institute; Nielson; Japan external Trade Organization ( JeTRO); Dentsu; BCG analysis.

Japans Consumers Benefit from the Internet


2016


2010

$706per

onlineuser

Television Online Online


3.1 5.6


$27billion


74.6

Newspaper

4.0

Out-of-home

6.7

Radio

9.1

Magazine

2.6

20162010

Totalretail

Onlineretail

$2billion(0.3%)

$10billion(1.6%)

14.9%CAGR

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Banco de mxico; INeGI; company reports; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in Mexico

Mexico

4.2

2016

2010

Consumption

Investment

Net exports

Percentage of GDP

9

9

18

TOTAL6124

187

Governmentspending

2

0

Mexico

G-20 G-20

2.5


2.5

Internet


Manufacturing

Financial services, insurance, real estate,and business services

Mining

Construction


Public and personal services

Agriculture, forestry, and fishing


5.34.1


TOTAL26

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Banco de mxico; INeGI; company reports; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Mexicos Internet Economy


28.1%CAGR

Magazine

8.6

Newspaper

9.2

2016


2010

$670per

onlineuser

Television Online Online


10.8 19.0


$33billion


53.8

Out-of-home

13.3

Radio

4.2

20162010

Totalretail

Onlineretail

$12billion(1.7%)

$43billion(3.2%)

Sources: economist Intelligence Unit (eIU); Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Central Control Directorate (Gku); iTu; Datamonitor; hSe; inSales; iDC; TnS; company reports; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in Russia

Russia

2.8

2016

2010

Consumption

Investment

Net exports

Percentage of GDP

12

21

TOTAL75

TOTAL27

63

--12

18

Governmentspending

3

2

Russia

G-20 G-20

1.9


1.9

Internet

Construction

Wholesale andretail trade

ProcessingReal estate

MiningLogistics and communications


Financial servicesEnergy, gas, and waterAgriculture

Health careEducation


Fishing

5.34.1


--5

Sources: economist Intelligence Unit (eIU); Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Central Control Directorate (Gku); iTu; Datamonitor; hSe; inSales; iDC; TnS; company reports; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Russias Internet Economy



What doconsumers

value?General search

News

$1,197

Fast food88

Car36

Social networking

Annual value

$89

Satellitenavigation

85Coee70

Alcohol80

Chocolate76

Exercise50

Shower14

Sex15

$102$1,002Consumer

surplus

$138

Perceivedvalue

Cost$196

Sources: economist Intelligence Unit (eIU); Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; Central Control Directorate (Gku); iTu; Datamonitor; hSe; inSales; iDC; TnS; company reports; BCG analysis.Note: Due to rounding, perceived value does not total consumer surplus plus cost.

Russias Consumers Benefit from the Internet


SaudiArabia

3.8

2016

2010

Consumption

Investment

Net exports

Percentage of GDP

5

7

TOTAL29

21

--42

5

Governmentspending

4

2

SaudiArabia

G-20 G-20

2.2


2.2

Internet

Financial services nondwellings

Mining


Nonoil manufacturing

Wholesale trade and restaurants

Construction

Financial services and real estate


Oil manufacturing


Social services


Mining and quarrying (nonoil)

5.34.1


TOTAL10

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); CCB; saudi arabia Central Department of statistics and Information; arab advisors Group; Pyramid Research; IemR; company reports; World Bank; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

Saudi Arabias Internet Economy


2010

$424per

onlineuser

$5billion


20162010

Totalretail

Onlineretail

$3billion(2.9%)

$15billion(8.0%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); CCB; saudi arabia Central Department of statistics and Information; arab advisors Group; Pyramid Research; IemR; company reports; World Bank; BCG analysis.

The Internets Impact on Commerce in Saudi Arabia


SouthAfrica

2.5

2016

2010

Consumption

Investment

Net exports

Percentage of GDP

4

6

TOTAL14

TOTAL7

9

--3--2

4

Governmentspending

2

1

SouthAfrica

G-20 G-20

1.9


1.9

Internet

Mining

Financial services, real estate, and business services

Manufacturing


Wholesale and retail trade, hotels, and restaurants

Personal services

Logistics and communication

Construction



5.34.1


Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; statistics south africa; IemR; Pyramid Research; World Wide Worx; company reports; World Bank; World Trade Organization; BCG analysis.Note: some columns may not add up to total contributions due to rounding.

South Africas Internet Economy

2016


2010

$339

24.2%CAGR

peronlineuser

Television Newspaper Out-of-homeRadio Magazine Online Online


3.9 8.0


$2billion


45.623.2

5.812.5

9.0

20162010

Totalretail

Onlineretail

$2billion(1.2%)

$4billion(1.5%)

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; statistics south africa; IemR; Pyramid Research; World Wide Worx; company reports; World Bank; World Trade Organization; BCG analysis.Note: Percentages may not total 100 due to rounding.

The Internets Impact on Commerce in South Africa



What doconsumers

value?

General search


$1,615

Satellitenavigation

81Fast food80

Car10

E-mailAnnual value

$211

Coee63

Alcohol77

Chocolate74

Exercise49

Shower13

Sex22

$211$1,215Consumer

surplus

$222

Perceivedvalue

Cost$400

Sources: economist Intelligence Unit; Ovum; Gartner; euromonitor International; Organisation for economic Co-operation and Development (OeCD); magnaglobal; CCB; statistics south africa; IemR; Pyramid Research; World Wide Worx; company reports; World Bank; World Trade Organization; BCG analysis.

South Africas Consumers Benefit from the Internet

The Boston Co

the internet economy in g-20

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