The Web's Untapped $133 Billion

Could you use a spare $133 billion? Look no further than the nearest Web browser.

Web users get more than 150 billion euros -- about $200 billion at current exchange rates -- in value from using the Web, according to a study from McKinsey & Co. Most of the value comes in the form of free email, search, social networking and instant messaging services, the consulting firm said, after surveying 4,500 U.S. and European Web users. The rest consists of other Web, communication and entertainment services such as Internet phone, gambling and online directories.

Businesses recoup only about $40 billion in the form of paid subscriptions such as those to music services and gambling sites. Consumers do "pay" in other ways, according to study author Jacques Bughin, a director in McKinsey's Brussels office. He places a $27 billion value on the "cost" of online advertising to consumers -- which he explains is the amount they pay to avoid ad pollution. Still, that leaves on the table $133 billion, which is enough to get many if not most business people's attention.

The obvious question is: How can a profit-minded enterprise wring some of the remaining value from the Web?

McKinsey sees problems with charging subscriptions or other fees for access to online resources. Only about 20 percent of Web users currently pay such fees, the company says, and it estimates that fully charging users for the value of Web services would slash usage by half.

Advertising is more promising. If consumers are willing to pay $27 billion to avoid advertising, while businesses are getting $40 billion from selling online ads, Bughin figures that leaves about $13 billion that could safely be extracted from online ads before a consumer revolt.

Of course, there is more than one way to profit from an Internet user. For instance, marketers could require users to provide more personal data, which would create an asset ripe for monetization. Bughin also notes that increasing the use of fees to access subscription-only -- but presumably ad-free -- services could also increase amount of ad pollution consumers would accept for free services.

Some portions of McKinsey's analysis are not entirely convincing. For example, Bughin notes that worldwide Web users pay about $160 billion for Internet access of various kinds. It seems this cost might be figured into the Web economy. After all, consumers of broadcast TV, which he uses at one point for comparison, do not pay to access content once they have purchased their television sets.

He also, from the standpoint of the small business, sounds a cautionary note when he says that the online market is rapidly consolidating. To be specific, he says the top 100 websites (i.e. Google, Facebook, Yahoo, etc.) accounted for 20 percent of Web traffic in 2007 but by 2010, that number had risen to 45 percent.

The clear takeaway for small Internet businesses is to think creatively and move fast. The time to get a share of that $133 billion may be short.

Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications long enough to lay somewhat legitimate claim to being The Article Authority. Follow him on Twitter @bizmyths.