The Internet Is Our Nation’s Strongest Economic Engine—Let’s Not Kill It With Misguided Regulation

Here’s an eye opener no matter what industry you’re in: The internet economy grew seven times faster than the total U.S. economy during the past four years and now accounts for an astonishing 12% of the U.S. GDP. That’s from a relatively young industry that has captured the attention and sparked the imagination of the entire country, and it’s according to the latest edition of a report, once called “The Economic Value of the Advertising-Supported Internet Ecosystem,” from the Interactive Advertising Bureau and John Deighton, the Harold M. Brierley Professor of Business Administration Emeritus, at the Harvard Business School—a report that I was fortunate enough to see birthed in 2008 when I was CMO at IAB. Now, the fourth version of that comes in a 136-page report, with a new and somewhat long title, “The Economic Impact of the Market-Making Internet – Advertising, Content, Commerce, and Innovation: Contribution to U.S. Employment and GDP.” That marketing mouthful of a title is likely meant to convey just how big the economic impact has become!

The internet economy’s contribution to the U.S. GDP grew 22% per year since 2016, in a national economy that grows between 2 to 3% per year. In 2020 alone, the ad-supported internet economy contributed $2.45 trillion to the nation’s $21.18 trillion GDP. Mind boggling. 

The report continues to establish that the ad-supported internet is a source of innovation and jobs, not just at big companies but at thousands of small ones across the nation. To wit:

  • More than 17 million jobs in the U.S. were created by the commercial internet, 7 million more (!) than four years ago.
  • More internet jobs (38%) were created by small firms and self-employed individuals than by the largest internet companies (34%).
  • And every single congressional district lives in part off internet-dependent jobs—and in many cases these districts have at least 10% of their residents working directly in the internet ecosystem, accounting for 9% of total U.S. internet employment.

In fact the study shows something one might not assume. Jobs driven by the digital economy have blossomed across the country and are not concentrated just in the places like Silicon Valley that most people would expect. To quote the report itself: “Despite the popular impression that Silicon Valley and a few other areas are the home of the internet, the top 10 congressional districts had only 12% of the jobs and 25% of the jobs were spread across the lighter 50% of congressional districts. No district had fewer than 347 jobs dependent on the internet, because infrastructure workers were widely dispersed and so were people selling or creating on the internet.”

This news comes out just as more and more people in Washington, D.C., think they know better than the leaders of the digital economy just how to get into the operations and manage the companies that have given us new pathways for communications and entertainment—and jobs. Politicians who have never worked one day in any digital company claim the expertise to be able to decide which direction those same companies should take. Digital media, as it feeds the nation’s hunger for growth like no other source, has become the easy target out of which every politician can create a populist, if uninformed, new campaign-donation strategy drive. 

Suddenly, everyone’s an expert. Got a seat in Congress and no job in the real world? Those qualifications obviously make you an expert in how digital media ought to run. For goodness’s sake, you’ve used social media and search to raise money to fund your campaigns and you have read newspapers and magazines all your life. You know how this stuff works…

Nowadays it seems about the only thing that the left-wing can agree on with the right-wing is that digital needs their bottomless intervention to work right. Put a leash on that crazy internet and voilà—happy America. No matter where you sit on the political spectrum, no matter if you started a digital publication or are a talking head on cable news shows, or if you’re in the lower or upper house of Congress in D.C., you are an expert on what is wrong with and how to fix multibillion-dollar businesses employing millions of people all across the country.

The national conversation is awash in naïve—and constitutionally dangerous—-ideas that include asking business owners to monitor in real time and gag dynamic speech that they are supposed to figure out is “unacceptable.”

That same inability to understand digital advertising, and why the solutions provided are really more harmful than useful, applies to the bipartisan legislation proposed by Senator Amy Klobuchar (D-MN) and Senator Chuck Grassley (R-IA). Without any supporting data, it cites out-of-thin-air “harms” to competition, online businesses, and consumers.  If you want to know who and what is going to put the country at risk, read the text of the legislation.

What the data does tell those of us who aren’t spun up in the emotional tornado of blame-the-internet is that the existing ad-supported internet is creating new markets and spurring job growth for large and small businesses. The current leaders in the field are under consistent challenge and competition from smaller companies. There’s competition as investments flow into new emerging companies, not just the supposed boogie man of “Big Tech”—a 124% increase in overall funding in early-stage/VC funding in the U.S. in just the last year. Does Senator Klobuchar wish to quash the booming small-tech investments in Minnesota, which haven’t been hobbled by big bad tech but instead have seen a 643% increase! Whom do we trust more to drive that kind of investment and innovation? A former lawyer and her bipartisan colleague who has been in Congress since 1981—or a marketplace of tech pioneers? 

The National Economic Research Associates (NERA) just released a report that estimates the total economic costs of seven recently proposed Congressional antitrust bills targeting tech giants. The firm estimates that subjecting these companies to the restrictions suggested by lawmakers would ultimately cost consumers $300 billion. Remember, all the claims by politicians that “business” will pick up the tab forgets that the tab always gets passed along to you-know-who.

But wait, it gets worse. NERA’s analysis also shows that these antitrust measures would disproportionately affect American companies—shackling their competitiveness on a global scale. 

Is there any doubt that members of Congress on opposite sides of the aisle can’t even agree on who was elected president last November but we are to trust their sudden agreement on this? I don’t know about you but it does make me wonder why an issue of historic importance to the survival of the country is relegated to a place below the tactics of intervention in industries. And in the case of the legislation in questions from two people who haven’t driven anywhere near the number of jobs and dynamic economic change as the ad-supported internet.  

Another misguided bill, the “Ending Platform Monopolies Act,” sponsored by U.S. Rep. Pramila Jayapal (D-WA) from Amazon’s home district in Seattle, effectively forcing Amazon to choose between its first- and third-party retail platforms. Never mind that Amazon third-party sellers have created an estimated 1.8 million U.S.-based jobs managing, operating, and supporting their Amazon-related businesses. Even if that number is a little inflated, that’s a lot of jobs that will go away if the legislation passes.

Good grief. Can’t we do like we usually do and agree to disagree? Wouldn’t that be less concerning than all jumping together to the same delusional score that if only Washington politicians get involved with managing the internet then finally we will fix what is wrong with our nation?

Billions of dollars currently flow in the free market to companies of all sizes and to employees and the self-employed (hello!). Instead of trying to squelch our best business with a misguided common wisdom of ill-considered legislation, we should be encouraging pushing on those businesses to help pay for the historic ideas we have for infrastructure and the entire Build Back Better Agenda. 

Legislators claim all this legislation is bipartisan and popular and good for you. But let’s face it, like castor oil, it’s a really dated, even bitter treatment. Besides, none of its claims to cure any ills is backed up by real data.

================

Source link

Leave a Reply