The Internet Value Chain

THE INTERNET VALUE CHAIN
It is important to note that this 2015 value chain, and the
corresponding analysis below, combines B2C and B2B.
The reason for this is the increasing overlap between
B2C and B2B in online services; for example social
networks such as LinkedIn, e-retail services such as
Amazon, and communication platforms such as Skype
(to name a few) actively serve both the B2C and B2B
market. 1 With the value chain structured to encompass
all types of players, we analyse the size of each category
(and, in select cases, subcategory) in terms of revenues,
growth rates, EBIT performance, degree of concentration,
and market capitalisation.
Adding up the global revenues of each category, we
estimate the internet economy to be worth nearly $3.5
trillion in 2015—more than 4 per cent of gross world
product, up from less than 2 per cent in 2008 (see figure
4). It is important to note that we only count the
proportion of spend attributable to internet provision of
a product or service. That is, if someone buys a used car
from a website, we count the commission earned and not
the full value of the car. For this reason, our analysis
differs from some other reports that ask the question
‘what proportion of the economy is touched in some
way by the internet?’
Figure 4
Market size by segment and category
$ billion, % of total market, 2015
CR
ONLINE SERVICES
ENABLING
TECHNOLOGY
AND SERVICES
CONNECTIVITY
USER INTERFACE
SPORTS
MUSIC
OTHER E-SERVICES
INFORMATION AND REFERENCE
CLOUD SERVICES
M2M
PAYMENT
PLATFORMS
SATELLITE
OPERATING
SYSTEMS
APP
STORES
SECURITY
AND
SOFTWARE
VIDEO
PUBLISHING
SEARCH
GAMING
SOCIAL AND
COMMUNITY
GAMBLING
IP COMMS
B2B COMMS
VIDEO
MUSIC
ADVERTISING
SERVICES
AD AGENCIES
FIXED
OTHER
CONSOLES SMART
ITEMS
TABLETS
OTHER
HARDWARE
WEARABLES
PUBLISHING
CORE NETWORK
AND INTERCHANGE
CONTENT DELIVERY
AND OPTIMISATION
SMART TVS
PCS
STBS
AND
DMRS
GAMING
B2B E-RETAIL
B2C E-RETAIL
E-TRAVEL
DESIGN AND
DEVELOPMENT
WEB HOSTING
MOBILE
SMARTPHONES
64 (2%) 1,637 (47%) 373 (11%) 577 (17%) 813 (23%)
TOTAL MARKET = $3,463 BILLION
Notes: The value chain is represented at category level, except when showing it at subcategory level would enhance the analysis and understanding.E-retail excludes all other paid-for services
captured in other parts of the internet value chain; also excludes sales of digital media content (publishing, gaming, video, music) and electronic data interchange. ‘Ad agencies’ includes
analytics, which is insufficiently large to be broken out. CR is content rights, IP is internet protocol, M2M is machine to machine, STB is set-top box, and DMR is digital media receiver.
Sources: Financial statements, investor presentations, broker reports; A.T. Kearney analysis
Online services, which are the services many consumers
probably perceive to actually be ‘the internet’,
represents slightly less than 50 per cent of the total
value chain. The next largest area, making up 24 per
cent, is the market for user interface, which covers the
devices and software that end users employ to access
those online services. The remaining revenues are
distributed across connectivity, enabling technology
and services, and content rights.
1 The Methodology section provides a full definition of each category and subcategory.
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