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A look at the historical growth of the U.S. internet sector

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Abstract

This paper presents an overview of the internet sector. The paper begins by introducing key concepts and definitions, particularly around technology, the internet, and the digital economy. It then provides a look on the industry’s economic size and performance over time using two unique datasets. The estimates illustrate the industry’s growth in key economic metrics over the past 5–15 years and also suggest some potential nuances, such as revenue seasonality. The paper contributes to the literature by being the first research, to the extent of the authors’ knowledge, to examine time series trends for the sector, rather than individual year snapshots.

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Fig. 1

Source Hooton (2017, Table 1, p. 6)

Fig. 2

Source Authors’ elaboration

Fig. 3

Source Authors’ elaboration

Fig. 4

Source Authors’ calculations

Fig. 5

Source Authors’ elaboration

Fig. 6

Source Authors’ elaboration

Fig. 7

Source Authors’ elaboration

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Notes

  1. The underlying data informing this report are part of a larger project pursued by Internet Association (IA) to measure and study the internet industry on a quarterly basis. IA is the only trade association that exclusively represents leading global internet companies on matters of public policy. IA publishes all of its research and data at https://internetassociation.org/.

  2. The full set of companies belonging to IA can be found at https://internetassociation.org/our-members/.

  3. The authors mention these firms only for conceptual purposes and do not claim they are clearly included in or excluded from the internet industry.

  4. This is, of course, a nuanced and dynamic distinction that itself merits more research beyond the scope of the current article.

  5. These industry codes are only guideposts; IA reviews the receipts of each specific product line and includes only those that are relevant.

  6. In updating the internet sector NAICS codes to the 2017 vintage, we also investigated other potential NAICS codes that should be inspected for inclusion in the internet industry definition. We identified these using the Standard Industrial Classifier (SIC) codes listed in publicly available company filings from the U.S. Securities and Exchange Commission for numerous technology companies. For the current paper, we use the NAICS codes in Table 1, but we mention it here to further acknowledge the potential issues with the current formal internet sector definition. The additional codes are 334111, 334413, 454110, 511210, 512290, 518210, 541511, 541512, 541690, 541810, 561510, 561599, and 811212.

  7. In some instances, the authors were unable to utilize full 6-digit NAICS codes for each industry within a dataset and, thus, had to occasionally use a higher level NAICS code such as a 5-digit or 4-digit code.

  8. While beyond the scope of the current article to detail fully, the productivity paradox referred to a ‘gap’ period in the late 1980s and early 1990s when there were large gains in worker productivity through the use of new ICT technologies, such as computers, but which did not show up in national productivity measurements. This phenomenon occurred across developed economies and many argue it persists to today, though to a lesser degree with hardware and software and more with digital technologies such as the internet. See David (1990) and Griliches (1994) for more details.

  9. BEA (2018) defines establishment as, “An economic unit–business or industrial–at a single geographic location, where business is conducted or where services or industrial operations are performed. An establishment is not necessarily identical to an enterprise or company, which may consist of one or more establishments.”

  10. Please note that Fig. 6 shows data for 2011–2015, but employment is available until 2016. The authors chose not to include employment estimates for 2016 because there are incomplete data observations in 2016 for establishments resulting in what (falsely) appears to be a 50% drop in the number of establishments. The lack of observations relates to the collection and publication timelines of government datasets and not an actual decline of 50% of internet sector establishments. We report only those years with full observations for both metrics to avoid confusion. Also, please note that this problem impacted only the establishment count and no other datasets or the authors’ estimates based on them.

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Authors and Affiliations

  1. The George Washington University Institute of Public Policy, Washington, DC, USA

    Christopher Hooton

  2. Internet Association, Washington, DC, USA

    Sera Crasta

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  1. Christopher Hooton
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  2. Sera Crasta
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Correspondence to Christopher Hooton.

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Hooton, C., Crasta, S. A look at the historical growth of the U.S. internet sector. Bus Econ 54, 226–235 (2019). https://doi.org/10.1057/s11369-019-00142-7

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