Netcraft released its latest Internet growth data recently and I noticed something peculiar ; The Internet  has grown more in the last 18 months than the 10 years before that.  As the global markets start to disintegrate I also started to wonder what relationship this has with regular economic data.

Google Finance has a neat little feature where you can overlay stock charts with industrial average tickers like ASX or the DOW which can be useful to see whether a stock currently trading at values below, above or on market average. The aim is to buy stocks that appear undervalued compared to the market average and avoid those that are overvalued.

I wanted to do a similar thing with the Netcraft data which tracks the number of “sites” or hostnames live on web servers worldwide but simply used Photoshop instead. The Netcraft data is a metric for the growth of the world wide web. Does it relate to economic health?

The result is obvious in some ways but not in others. Generally the growth of the internet has been trending upwards the whole time since 1995 but there was a slight slowdown / dip in 2002 following the dot-com bust which is clearly reflected in the DOW JONES index market crash.

For the next 5 years from 2003 to 2008 growth appears mostly parallel .. the economy grows, the internet grows.

But then something interesting happens.. we get the Global Financial Crisis where markets are decimated to levels below the previous dotcom bust. This time however, internet growth doesn’t dip at all, it actually accelerates. According to Netcraft the big peak at this time is due to growth in China’s QQ.com domain blogging sites and when the blogs are made private in 2010 the peak drops down again. But even if we strike off that blip in the data the trend is still clearly upwards during the GFC.

At that time there were about 200M sites being reported, but in the last 18 months this figure has become 464M! It has more than doubled, with the sharpest increase in the last months, while the markets freefall again.

So when exactly, and why did Internet growth decouple from economic activity? It appeared to have a relationship back in 2001, perhaps as the gold rush for websites fuel economic growth. As we return to fundamental market forces (debt, resources etc) the growth if the internet is perhaps irrelevant. But why then the opposite correlation with Internet growth being inverse to economic disaster?

One thing is clear.. as recessional and financial disaster loom, the Internet is now more important than ever. It it no replacement for food and shelter but it now plays a fundamental role in the health and well being of a nation. The only companies in the USA that do not seem to be facing financial issues, are the tech behemoths. Apple currently has more cash on hand than the US government, and that’s food for thought.