Digital Industry Continues To Grow Despite Threat of Recession
Internet Industry Monitor by eco: Inflation exerts temporary price pressure on the internet industry.
Russia’s war against Ukraine is having a significant impact on the economy. According to the current Internet Industry Monitor by eco and Arthur D. Little, however, the impact on the German internet industry is limited compared to other industries. The eco industry monitor expects an average of 12.20 percent per year until 2025.
“Needless to say, the ongoing inflation as well as the tense situation on the financial, commodity and energy markets are not leaving our industry unscathed,” says eco CEO Oliver Süme. In particular, rising interest rates as well as energy and production costs are also putting increasing pressure on the internet industry and could lead to falling margins in some areas. “Nevertheless, we still see growth trends in all segments, which prove that digitalisation is not a short-term trend, but that we must continue to invest in the sustainable digital transformation of the economy and society,” says Süme. Policy must focus on activities that help reduce uncertainty and support investment and business development. As examples, Same cites a fast and reliable arrangement of the transatlantic data protection agreement as well as measures to strengthen digital sovereignty and energy independence.
Price pressure from inflation leads to short-term revenue growth
“Across the internet industry, all four segments are seeing short-term revenue growth due to inflation-driven price increases and a trend towards localising and securing local infrastructure, services and consumption,” says Lars Riegel, partner at consultancy Arthur D. Little (ADL). By 2025, the consultancy therefore expects an average annual growth of 12.2 percent for the German internet industry, which would mean an increase in turnover to 258 billion euros. “In the medium term, however, there is a risk of an economic slowdown and an attempt by consumers to cut back on spending on services that are not urgently needed,” Riegel continues.
The services and applications sector is benefiting from the increased willingness to invest in cyber security. The eco IT Security Survey 2022 shows that 94 percent of TMT companies believe the risk of IT threats has increased this year, while 71 percent believe existing cybersecurity systems are inadequate. As a result, in the medium term, the highest growth rates are also expected in this industry segment. The eco industry monitor expects until 2025 an average of 18.4 percent per year.
