INTERNET LAW - Internet Economy Surges Despite Global Slowdown

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Despite repeated reports of bad economic news in many sectors, the Internet continues its global expansion, giving great comfort to those still trying to understand what a world marketplace with a dwindling oil supply will look like. While some segments of the U.S. economy are slowing, online sales are growing, and recent figures show that e-commerce transactions are growing four or five times faster than traditional retail, according to Rob Atkinson, president of the Information Technology and Innovation Foundation. Atkinson made his comments at a recent forum on the state of the Internet economy at Google's brand new Washington D.C. office.

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Despite repeated reports of bad economic news in many sectors, the Internet continues its global expansion, giving great comfort to those still trying to understand what a world marketplace with a dwindling oil supply will look like. While some segments of the U.S. economy are slowing, online sales are growing, and recent figures show that  e-commerce transactions are growing four or five times faster than traditional retail, according to Rob Atkinson, president of the Information Technology and Innovation Foundation. Atkinson made his comments at a recent forum on the state of the Internet economy at Google's brand new Washington D.C. office.

Bearing in mind the Web as a major player is not yet two-decades old, Information Technology (IT) which includes the Internet, is now the major driver of economic growth in the U.S., according to Atkinson. Dismissing the idea that Net commerce suffered a wild collapse in the early 2000's from an "Internet Bubble," Atkinson said, "The Internet is not a bubble. A lot of dumb, bad companies went out of business [earlier in the decade], but the industry continued to grow." Atkinson added, "There's absolutely no evidence that somehow, we're at the end of the IT revolution. I think we've got a minimum of 10 or 15 years, maybe a lot longer."

Despite fears of another Internet slowdown, the state of the Internet economy is strong. Online retail sales, excluding travel, reached $175 billion in 2007, up 21% over 2006. According to analysts, online sales to exceed $200 billion this year and should exceed $300 billion by 2011.

Hal Varian, a Professor turned in-house Goggle economist spoke at the forum. Said Varian, "The lesson you learn from looking at query patterns on Google is, yes, we're seeing an economic slowdown, but no, that's not an Internet slowdown.. The Internet is still looking pretty strong, compared to most of these other sectors."  Varian says an analysis of search queries at Google shows insightful data about the state-of-mind of Net users.  For example, job-related searches have increased while real-estate and luxury goods searches are down. This is exactly what you'd expect to find in a "recessionary environment," claims Varian. Yet, overall, the sum total number of searches on all topics is growing "very dramatically," states Varian.

Panelist Edwin Garrubbo, chairman of the Electronic Retailing Association, claims there is no slowing down the rapid growth of the Web. While online sales currently account for only a fraction of total U.S. retail sales, being 3.5% in 2007, over 2.6% in 2006, Garrubbo's claims are not just idle boasts. For instance, marquis retailer Saks Fifth Avenue currently does more sales volume from its flagship Manhattan store, yet its Web business ranks second. Garrubbo predicts "it's only a matter of time before the potential for that online business is going to far exceed New York's," and will eventually be greater than "all of its other stores combined." Garrubbo also believes the current recession could actually prove a boon for online businesses, as consumers are motivated to find better deals because of a smaller wallet, as he said, "A recession forces smarter decisions, and there's an increased desire to go online."

Atkinson believes the growth and the potential of the Internet still baffles many politicians in Washington. He said the officials, "still don't understand how much of a driving force information technology and the Internet are in the economy, responsible for a lot of growth." Atkinson calls personalized online ads "economic rocket fuel" that could further boost growth. On this he warned that the Government should not unnecessarily hamper commerce with efforts to protect consumer privacy online, a topic currently under discussion by the Federal Trade Commission and the U.S. Congress.

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