European Public Policy Blog: How the Internet powers German ...

In Germany, we?ve long believed that the Internet helps create innovative new small businesses - and that SMEs that go online, grow faster, export more and create more jobs than their offline competitors. But to prove it, we needed solid evidence. So we commissioned the Institute of the German Economy in Cologne (IW Cologne) to find out how the Internet has benefited SMEs - and the German economy.

The findings, released this week, are startling. Since 2007, they estimate that German entrepreneurs have founded 28,000 new businesses using online services from Google and other web companies. These new businesses have created nearly 100,000 new jobs and in 2010 generated EUR 8.6 billion in sales.

As part of the research, the consultants more than 11,000 Google customers in Germany. About two-thirds of them already sell their products online, a much higher proportion than the German average (a quarter of German businesses engage in ecommerce). Our customers report that selling online has kept them nimble and able to react quickly to new opportunities, reaching new customers (78%) or even new markets (35%).

The new study suggests that online business is particularly effective for small companies with up to nine employees. On average, these small businesses generate 42% of their sales via online advertising, while companies with more than 50 employees tend to generate only around 15% of their revenues via online.

Small, Internet-savvy businesses are also more innovative than the German average. In 2010, 20% of Google customers had their own research and development operations - nearly twice as many as at the average German company. Those same companies achieve 36% of their turnover with new products and services that they developed themselves, compared to only 23% for companies for whom the Internet plays a minor role.

?Of course there is no app for business success. But it is clear that savvy Internet use has massive advantages?, says Rene Arnold of the IW Cologne. ?The internet is the steam engine of the 21st century.?

Posted by Ralf Bremer, Senior Communications Manager, Berlin

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