US downturn fails to dampen Internet economy

Some experts remain optimistic about the Internet economy, they said last Friday at a Google-sponsored event examining the Internet economy.

The ever-growing Internet economy should be less susceptible to a US economic downturn than many other industries, with more and more people shopping and doing business online, a group of commentators and business people said last Friday.

Although many segments of the US economy are slowing, there's little indication of a downturn in online sales, with e-commerce growing four to five times faster than traditional retail, said Rob Atkinson, president of the Washington, DC thinktank, the Information Technology and Innovation Foundation. IT, including the Internet, is currently the major driver of economic growth in the US, he said at a Google-sponsored event examining the Internet economy.

While some commentators have worried about a second Internet bubble bursting, Atkinson suggested the first bubble in 2000 and 2001 may have been overstated. Many of the companies publicised as failures during that time frame are either still operating or their business models have become successful through other companies.

"The Internet is not a bubble," Atkinson said. "A lot of dumb, bad companies went out of business [earlier in the decade], but the industry continued to grow."

The Google event seemed to be targeted at commentators who have predicted a second bubble burst, particularly following the hype in recent years surrounding social-networking sites.

But the overall state of the Internet economy is strong, even though the percentage of Google searches for things like real estate and luxury goods have dropped off in recent months, said Hal Varian, Google's chief economist. Those Google searches reflect the state of the overall US economy, he added.

E-commerce has continued to grow in recent months, Varian said. "Yes, we are seeing an economic slowdown," he said. "No, we're not seeing an Internet slowdown."