Why Internet is good for the (Russian) Economy

Eric Hazan, Partner and McKinsey & Company and a friend of DLD, took the opportunity on Day 1 of the DLD Moscow to present McKinsey’s latest annual report on the impact of technology on GDP growth. With him on stage was Associate Principal, Aigool Khalikova.

This year’s report focuses on 30 aspiring countries and analyzes the Internet’s contribution to GDP. The results show a couple of interesting tendencies, for Russia and beyond. 

Here is a selection of what Hazan told the crowd:

- Internet’s impact on GDP: Nigeria has the lowest percentage of impact by internet to the overall GDP at 0.5%. The highest for an aspiring country is Taiwan at 5.4%, the average being 2.0%. Russia is currently at 0.8%.

- Internet users: More than half of all of the world’s Internet users are now in aspiring countries. It is estimated that the world will reach 2.7 billion Internet users by 2015. 18% of these will come from aspiring countries like Russia, representing a growth rate that is 6 times faster than that of developed countries.

- Language: Today’s the biggest Internet language is English, followed by Chinese and Spanish. But Russian is the second fastest growing language on the Internet, surpassed only by Arabic.

- Jobs: The Internet globally creates more SME jobs than it destroys. The BRIC countries are currently leading this trend, showing a 120% rate of jobs created per job reduced.

- Shopping: In today’s Russia, some 70% of McKinsey’s respondent had bought something online within the past 3 months. Products in demand are electronics, video games, music, and books.

- Going social: In Russia, some 27% admitted to be following their favorite brands on Facebook. In the U.S., the number is only slightly higher at 34%. Using Twitter to follow brands is by now more popular in Russia in the U.S. 28% of Russians use Twitter to follow retailers - in the U.S. the number is 25%.

In general, Hazan pointed out, aspiring countries show great potential for growth thanks to Internet.

Consumer behavior in countries like Russia is today more similar to those in mature ecosystems than it is different. To reach its full potential, however, development is needed. Infrastructures must be build and human capital must be leveraged, Hazan concluded.