The U.S. has reached a tipping point in its shift from the industrial economy — one that relied on the buildout of hardware — to an information economy that relies on the transfer, storage and implementation of data, according to a new report.
Why it matters: This shift towards a data and information-based economy has allowed more businesses to establish themselves and scale quickly and at a very low cost. As such, the number of jobs created by the commercial internet has more than tripled since 2012.
- “The adoption of the internet both by firms as producers and by consumers as users is now broad enough that America’s economic future will depend more on its competitiveness in information gathering and use than on its manufacturing and materials processing edge,” said John Deighton, a Harvard Business School professor and co-author of a new report detailing the trend.
The big picture: The new report, which is published every four years by the Interactive Advertising Bureau and written in conjunction with researchers, finds that the internet-supported economy over the past decade has shifted from jobs that related mostly to technical internet functions, like coding, to jobs that help deliver information and facilitate communication through data.
- “In the last four years we’ve seen so many products that provide the solution to the code problem, that you can essentially start a business on the internet without being a technologist,” said Deighton, referring to the rise of SAAS (software as a service) companies.
- “We call this the emergence of the no-code approach to businesses,” said Leora Kornfeld, Principal Research Consultant Deighton Associates LLC and co-author of the study. Kornfeld says more businesses today are licensing out their technical needs to enterprise firms like Adobe and Salesforce so they can focus hiring on other business functions, like content, sales or marketing.
By the numbers: As a result of this shift, jobs related to news, information and entertainment companies are exploding.
- The number of people employed in news and information-related publishing tripled between 2008 and 2020 to more than 142,000 people.
- The internet employs almost as many creators (200,000 full-time equivalent jobs) as the rest of the U.S. entertainment industry as represented by the largest unions (160,000 represented by the SAG-AFTRA, 80,000 represented by the American Federation of Musicians, 24,000 represented by the Writer’s Guild and 9,000 represented by the Authors Guild.)
- The digital entertainment sector grew revenues and jobs by 13 times and four times, respectively, compared to 2008. Newer industries like podcasting, streaming and digital gaming have seen the most growth. Gaming revenue has grown tenfold, while employment has only grown by three times.
- More than half of all U.S. advertising and media employment now comes from the internet, per the report. Deighton notes that in recent years, there’s been a proliferation of content-based business models on the internet beyond advertising, like creator payments and in-app transactions.
The big picture: Overall, the internet-supported economy now accounts for 12% of U.S. gross domestic product, up from 2% in 2008. It has grown seven times faster than the total U.S. economy in the past four years.
- U.S. internet-supported jobs have shifted even farther outside core tech hubs in Silicon Valley and other coastal cities to more rural places and smaller cities.
- There are now more than 17 million internet-supported jobs in the U.S,, up from 3 million in 2008, per the report.
- While the authors of the study acknowledge that Big Tech firms play an enormous role in the internet economy, they found that more internet jobs are generated by small firms (19%) and self-employed individuals (19%) put together than by the largest firms (34%).
What to watch: The internet has made it easier for people to participate in part-time or “gig economy” work.
- Researchers estimate that 850,000 people are self-employed and that 450,000 work for small internet-based businesses, across service platforms like Airbnb and Uber, as well as seller platforms like Etsy and Amazon.
- Of note: The study’s authors accounted for part-time roles by converting them to full-time equivalents earning the U.S. average wage of $55,000 per year.