Web Ads' Contribution to U.S.: $300B and Gobs Of Jobs

Online advertising contributes $300 billion to the U.S. economy, totaling 2.1 percent of the nation’s total gross domestic product, claims a study conducted by two Harvard Business School professors on behalf of the Interactive Advertising Bureau.

The IAB hosted a news conference announcing the results as a cadre of small publishers descended on Washington, DC at its behest. Both the study and small publisher fly-in in are part of a “show of force,” as the IAB is calling it, intended to head off privacy legislation that could negatively impact online advertising.

The study’s authors believe the ad-supported Internet directly employs 1.2 million Americans, the majority of which enjoy above-average wages. Another 1.9 million are holding jobs more generally related to the Internet.

For the purposes of this analysis, the ad-supported Internet is defined as the content and services supported by the $23.4 billion in digital ads IAB estimates were purchased last year in this country. ISPs, e-mail marketing firms, ad networks, and even hardware firms were among the types of companies examined.

For comparison, the study’s estimate would put the Web ad sector roughly on par with the farm sector. According to the U.S. Department of Commerce’s Bureau of Economic Analysis, farming output, production, and income accounted for $307 billion in 2007, the most recent year for which data are available. The bureau does not break out Internet advertising, but rather includes it as part of the Internet publishing and broadcasting industry.

A key point in the IAB’s message to Congress is that the digital ad ecosystem is an important driver of small business success, and that undue regulation would distress small to mid-sized firms. To drive that point home, the IAB has flown in small publishers from 25 Congressional districts and 13 states to talk about the importance of online advertising to their livelihoods. Their appearance in the capital follows the release of a short film, “I am the Long Tail,” in which small publishers tell their stories.

The IAB’s measures follow many months of signals from Congress and the Federal Trade Commission that the online ad sector faces privacy regulation unless it takes more serious steps to disclose their use of consumer behavioral data.

On an industry panel last month in DC, FTC staffer Richard Quaresima urged companies using behavioral advertising to notify users prominently of those practices, and not to rely on privacy policies.

“I think you can view this as an extremely strong nudge,” he said. He said if disclosure is not made more prominent, “There could be a lot more draconian measures imposed.”

Chuck Curran, executive director of behavioral ad industry body Network Advertising Initiative, acknowledged the heightened focus on such disclosure and opt-out.

“The stick is being waved at industry,” he said.