New Report by The Boston Consulting Group Provides the First and Most Comprehensive Study of the Global—and Local—Impact of the Internet Across the G-20
Dubai, March 27, 2012— The Saudi Internet economy contributed SAR37 billion to the overall Saudi economy in 2010, representing 2.2 percent of GDP, and putting Saudi Arabia at 13th place amongst the G-20 countries. This figure is projected to rise to SAR107 billion by 2016, representing 3.8 percent of GDP, according to a new report in The Boston Consulting Group’s Connected World series. It found that by 2016 the total size of the G-20 Internet economy will be $4.2 trillion, equivalent to 5.3 percent of GDP, up from $2.3 trillion or 4.1 percent in 2010.
‘The $4.2 Trillion Opportunity: The Internet Economy in the G-20’ finds that if the Internet were a sector in Saudi Arabia, it would be more than twice as large as the utilities sector.
Saudi Arabia’s Internet economy growth rate of 19.5 percent compares favorably to other developing nations in the G-20, which are growing at an average of 17.8 percent. Projected growth rates elsewhere are: 24.3 percent in Argentina, 18.3 percent in Russia and 15.6 percent in Mexico. In 2016, Saudi Arabia will rank number 10 in the G-20, with its contribution to GDP increasing to 3.8 percent.
These growth rates are impressive compared to the Internet economies of developed G-20 markets, which are expected to grow at an average of 8.1 percent through 2016 – for example, 10.9 percent for the U.K. and 7.8 percent for Germany. In 2010 developed markets contributed 76 percent of the G-20’s Internet economy; by 2016 that will fall to 66 percent.
“The Internet offers one of the world’s unfettered growth stories,” said Joerg Hildebrandt, Partner and Managing Director at BCG Middle East. “A robust Internet economy is an essential underpinning for Saudi Arabia’s future, providing both economic and social benefits.”
The $4.2 Trillion Opportunity builds on three years of research conducted by BCG and is the most comprehensive report published on the impact of the Internet globally. This study is the first to examine the Internet’s economic impact across so much of the world’s economy – 90 percent of global GDP – and highlights how this increases as mobile devices and social networks become more prevalent.
In 2010, the share of total retail carried out online in Saudi Arabia was 2.9 percent or $3 billion and is projected to reach 8.0 percent or $15 billion by 2016. Hildebrandt said: “This represents a dramatic increase and to put it into perspective, it would place Saudi Arabia at 5th position amongst the G-20 countries, following only UK, Germany, Australia and South Korea.”
What’s more, in 2010, the Internet influenced an additional 4.7 percent of total retail from connected consumers researching online and purchasing offline (‘ROPO’) in Saudi Arabia. These numbers compare to 4.0 percent for Brazil, 4.8 percent for Russia, and 9.6 percent for the U.S.
Consumers are the big winners of the Internet economy and BCG’s study highlights just how essential it has become to everyday life and the value which consumers attach to it. Asked how much they would have to be paid to live without Internet access, respondents across the G-20 said an average of US$1,430 per year, or 4.6 times what they pay for access and services.
SMEs – The Growth Engines of the Economy
The report highlights the extent to which the Internet is driving growth in businesses across the G-20. Drawn from the most comprehensive survey of its kind of SMEs around the world, the BCG report finds that “High-web” companies – ones that embrace the Internet for marketing, sales and interactions with customers and suppliers – have grown revenues up to 22 percent points faster over the past three years compared to those who made low or no use of the Internet.
“Around the world SMEs which embrace the Internet are growing faster and adding more jobs than those that don’t. By encouraging businesses to adopt the Internet, countries can improve their competitiveness and growth prospects,” said Hildebrandt.
The value of the Internet economy was estimated using the expenditure approach to GDP measurement. This approach measures total spending on finished goods and services. It covers four key elements: consumption (both goods sold online and the costs of getting online), investment, government spending, and net exports. BCG used the loss aversion approach to measure the value of the Internet to consumers, in a survey of 9,710 Internet users in 13 countries.
A copy of the report can be downloaded at www.bcgperspectives.com.
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world’s 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 insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive 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.
BCG serves the Middle East from Abu Dhabi and Dubai. Our offices there, in conjunction with the BCG office in Casablanca, play a key role in serving clients in the rapidly developing Gulf region as well as Middle East North Africa (MENA). To date BCG has successfully conducted assignments in the Middle East serving clients across a wide range of sectors,