The Boston Consulting Group (BCG) recently unveiled the results of its research on the internet economy, commissioned by the ICANN. In the study, Greasing the Wheels of the Internet Economy, the BCG researchers identified four types of e-friction restricting the growth of the internet economy throughout the world.
The first and most important type are infrastructure-related frictions, which limit internet access and online activity. Industry frictions include a shortage of capital and qualified specialists, and undermine the growth of internet businesses. Individual frictions influence consumer confidence in the internet economy and include safety issues related to personal data and e-payment systems.
Finally, information frictions involve the availability of, and access to, online content in individual countries. The development of the internet economy is essential for economic growth, the study argues. According to researchers, by 2016 the size of the internet economy in the G20 countries will exceed $4.2 trillion. A national economy of this size would be the fifth largest in the world, behind the US, China, Japan and India, and followed by Germany.
Currently, countries with a low “e-friction rate” have over twice as high a percentage of internet economy as part of their GDP as countries with a greater friction rate. This trend is expected to increase in the future, researchers believe. According to the study, the impact of the friction rate is even larger on small and medium-sized businesses.
Government attempts to control cyberspace and restrict access to internet content are the key factors undermining the growth of the digital economy, according to the report. The study ranks 65 countries according to their e-friction index. The Scandinavian countries are ranked the highest, with Sweden scoring the lowest friction rate of 14, followed by Finland and Denmark. Nigeria is the last in the rating with a friction rate of 82. Russia is ranked 43rd with a friction rate of 60.
According to the study, infrastructure frictions are the main factors restricting the growth of the internet economy in Russia. At the same time, researchers note that the level of online activity and the growth of the internet economy in Russia have been higher than expected, considering the existing frictions.
