Internet Economy

The internet economy is the part of economic activity that depends on the internet: online buying and selling (e-commerce), digital services and advertising, online platforms, cloud computing, digital payments, and the networks, data centers and devices that carry it all. The term is often used interchangeably with "digital economy", although the digital economy is usually defined more broadly to include all information and communications technology, whether or not it runs over the internet.

The internet began as ARPANET, a US research network first connected in 1969. Tim Berners-Lee proposed the World Wide Web at CERN in 1989, and the decommissioning of the US NSFNET backbone in 1995 completed the move to commercial networks. The late-1990s dot-com boom ended in a crash in 2000, a classic economic bubble, but online activity kept growing. According to the International Telecommunication Union, about 6 billion people, roughly 74% of the world's population, used the internet in 2025, while about 2.2 billion remained offline.

Think of the internet as a road network. The internet economy is everything that lines those roads: the shops, warehouses, delivery vans, toll booths, billboards and banks that use them to do business. Some of it is entirely new, such as search engines. Much of it is old business, like shopping or banking, moved onto new roads.

Because these roads reach almost everyone and cost little to travel, a business can serve customers in many countries from one place. That makes some firms very large very quickly, and it also makes the economy harder to measure and to regulate.

• Infrastructure. Telecom networks, undersea cables, data centers and cloud computing services.
• Platforms and marketplaces. Platform companies that connect buyers and sellers, drivers and riders, or developers and users.
• Online retail and media. E-commerce, streaming, games and digital advertising.
• Finance. Online banking, fintech apps, wallets and payment processing.
• Online work. Freelance and delivery work in the gig economy, remote services and business process outsourcing.
• Connected devices. Sensors and machines that exchange data over the internet of things.

Digital goods can be copied and delivered at almost no extra cost, so their marginal cost is close to zero. Combined with network effects, this tends to produce winner-takes-all markets with a few very large firms. The internet also cuts the cost of finding, comparing and contracting with distant partners, which, in the language of the theory of the firm, changes what companies choose to do in-house and what they buy. Many services are free to users and paid for with advertising or data, which raises questions about privacy and about who captures the value.

The internet has helped new firms start cheaply, supported innovation in products and business models, and made prices more transparent. It has also put pressure on traditional retailers, newspapers and travel agents, an example of creative destruction.

Official statistics struggle with the internet economy. Free services add to people's welfare but contribute little to GDP, which measures market transactions. Cross-border digital services are hard to track, and much investment takes the form of software, data and other intangible assets. Statistical agencies have responded with dedicated measures: the US Bureau of Economic Analysis publishes digital economy estimates, and the OECD and UNCTAD publish guidance and data on digital trade. Debates about whether the internet has raised measured productivity as much as expected continue, as discussed under technological progress.

Online commerce needs ways to pay without cash. Cards remain central in many markets, but wallets and account-to-account systems have grown fast. India's Unified Payments Interface and Brazil's Pix handle very large volumes of everyday payments, and mobile money serves users without bank accounts across Africa and parts of Asia. Cross-border online sales raise issues of currency conversion, fraud and consumer protection.

The digital divide remains wide: the ITU estimates that in 2025 about 94% of people in high-income countries used the internet, against 23% in low-income countries. Governments also face questions about how to tax companies that earn revenue in a country without a physical presence there. Several countries introduced digital services taxes, including the United Kingdom's 2% levy from April 2020, while OECD-led talks sought a global agreement. Other issues include competition rules for dominant platforms under antitrust law and new regimes such as the EU Digital Markets Act, data protection under laws such as the General Data Protection Regulation, cybersecurity, and content moderation.

• ITU: Facts and Figures 2025
• US Bureau of Economic Analysis: Digital Economy