Report: Online businesses growing 68 percent

WASHINGTON -- Internet businesses will grow revenues at a booming 68 percent rate this year and appear to be helping boost productivity and hold down inflation, according to a study released Wednesday by researchers at the University of Texas. Revenues of all U.

WASHINGTON -- Internet businesses will grow revenues at a booming 68 percent rate this year and appear to be helping boost productivity and hold down inflation, according to a study released Wednesday by researchers at the University of Texas.

Revenues of all U.S. Internet-related businesses, ranging from sales of computer hardware for running the global network to electronic trade of books, movies and plane tickets, will total an estimated $507 billion in 1999, up from $301 billion in 1998, the study found.

Data from the study, funded by leading hardware maker Cisco Systems Inc. showed that Internet businesses were adding employees at a faster rate than companies in the overall U.S. economy.

Internet businesses employed 2.3 million people as of the end of the first quarter of 1999, up from 1.6 million one year earlier.

That 46 percent growth was outstripped by the 68 percent growth in revenues, comparing the same periods. That appeared to indicate that Internet businesses are becoming more efficient as they grow, the study's authors said.

"The suggestion that we're getting from the data -- without being conclusive -- is that the more you use digital processes in your company, the potential productivity gains are greater and eventually the profitability would be greater," said Andrew Whinston, University of Texas professor and co-author of the study.

Networking, software boom
In the first quarter of 1999, the study found that the revenues of companies supplying networking gear to build the Internet grew 50 percent from the same period a year earlier to $40 billion. Revenue of companies selling software and applications for the Internet grew 61 percent to $22 billion.

Sales by intermediaries, such as ticket agents or mortgage brokers, rose 52 percent to $17 billion.

The fastest growing sector was sales of actual goods and services over the Internet, like books sold by Amazon.com or games sold by eToys.

Electronic commerce totaled $38 billion in the first quarter of 1999, up 128 percent from the first quarter of 1998.

The data were collected from a survey of 3,400 businesses that do some or all of their business on the Internet or in Internet-related fields. Results released Wednesday updated 1998 Internet economic data released by the same researchers in June.

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