The Ad-Supported Internet Powers the American Economy
|At a time when Americans are counting on tech more than ever, it can be easy to forget that the internet as we know it — with information on every topic, in every language, at the fingertips of billions of people — is powered by advertising. |
The ad-supported internet fosters a win-win ecosystem: free websites and helpful services for consumers, and unprecedented growth opportunities for businesses large and small:
— The ad-supported internet powers the American economy, creating millions of jobs—with job growth 10x the national average—and over $1 trillion in GDP.
— Consumers benefit from an array of free content and services, from websites to search engines to email to maps.
— Businesses—and small businesses, in particular—can reach a global consumer base through low-cost, highly effective advertising.
|How jobs and the economy benefit…|
The ad-supported internet is responsible for over 10 million American jobs, finds a 2017 study from the Harvard Business School professor John Deighton and the Interactive Advertising Bureau:The ad-supported internet ecosystem generated $1.121 trillion for the American economy in 2016.The ad-supported internet is responsible for 10.4 million jobs in the U.S., accounting for 7.3% of the country’s total nonfarm employment.The annual growth rate of employment in the ad-supported internet economy was 19.6% from 2012 to 2016, compared to nationwide average annual growth in employment of 1.82% during those same years.The ad-supported internet ecosystem accounted for 6% of the U.S. gross domestic product (GDP) in 2016.
Rather than being concentrated geographically, ad-supported internet jobs are dispersed across the country, the study finds. “There was internet-related employment in every congressional district of the U.S. The dispersion of the workforce was broad, with 116 congressional districts accounting for half of the employment, and 320 accounting for the other half. California’s Silicon Valley accounts for only four percent of jobs directly attributed to the ad-supported internet ecosystem. Another 10 percent is found in New York’s Manhattan, Virginia’s Arlington County, Boston’s Route 128, and Washington’s Seattle/Tacoma. But the great majority of jobs, 86 percent, lie beyond the centers of internet concentration.“
Ad-supported business models have led to increased competition, notes Gregory Leonard of Charles River Associates. “Ad-supported business models have created an economically viable pathway for entrants to compete in markets in which they might otherwise have chosen not to participate. This has had two pro-competitive effects. First, the entry fostered by the availability of ad-supported business models has led to a larger number of competitors. Second, the new entrants have offered innovative new products, increasing the product variety available to consumers. Both of these effects serve to increase output, increase quality, and decrease price.”
What consumers say…
84.1% of Americans prefer an ad-supported internet where most content is free to a paid internet where everything costs money because there is no advertising, according to a recent Digital Advertising Alliance poll.
|Other highlights from the poll include:The vast majority (85%) say they would reduce their online and mobile activities if they had to pay hundreds of dollars a year for the content and services they currently get for free.Four in five respondents (80%) say they would be more likely to purchase a mobile phone offering more free apps over a comparable phone with fewer free apps.Nearly all the respondents (93%) say free Internet content such as news, weather, email, and blogs is very or somewhat important to them.Free ad-supported tech services are worth thousands of dollars per year to consumers, finds a Brookings Institution study by MIT’s Erik Brynjolfsson and Avinash Collis. “Overall our results indicate that digital goods have created a tremendous amount of economic wellbeing as indicated by our measures of consumer surplus. Search engines are the most valued category of goods in the US with a very high valuation of over $17,000 per year, followed by Email and Maps.”|
What businesses say…
Free apps and websites are possible only because those app and website publishers make money selling ads on their apps and sites, says the Network Advertising Initiative. “Today, a broad array of rich content is available on the Internet, including information and news content, video and music streaming services, and interactive software services such as email and social networks. These have all experienced robust growth over the last several years, providing a wide array of transformative benefits to consumers for free, or for little cost, supported by digital advertising. Digital advertising, particularly personalized advertising, has been the lifeblood for the Internet and the digital economy, providing significant benefits to consumers by connecting them with products and services that are more relevant to their interests, and providing opportunities for American businesses large and small to connect with consumers.”
The majority of small businesses report that they would not have a cost-effective way to advertise without online ads, according to a 2019 poll from the Small Business and Entrepreneurship Council.
A case in point: Betsy Mikesell, co-founder of Utah-based bedding manufacturer Beddy’s, says that digital tools are critical to her businesses’ success. “For our 15 employees and thousands of customers, the benefits of digital technology and platforms are obvious. Without our digital partners we would never have started this business, and likely we could not continue in business without them. We are 100% online — primarily because that’s where our customers are.”
Digital advertising is both cheaper and more productive than print alternatives, finds Michael Mandel of the Progressive Policy Institute. “We calculate, based on several assumptions, that for every $3 that an advertiser spends on digital advertising, they would have to spend $5 on print advertising to get the same impact. In the economic sense, digital advertising is more productive than print advertising. The benefits of these lower prices flow directly to advertisers and consumers.”