The Internet economy of the world is projected to increase dramatically by 2016 providing companies and countries a vital source of growth, a report has said.

The biggest driver is the unprecedented increase in the number of users around the globe from 1.9 billion in 2010 to a projected 3 billion in 2016, about 45 per cent of the world's population.

The rise of the emerging markets, the popularity of mobile devices, especially smart phones, and the growth of social media are also compounding the economic impact of the Internet.

In the Digital Manifesto: How Companies and Countries Can Win in the Digital Economy, the latest in a series of BCG reports on the rise of the Internet, BCG makes the case that businesses will be fundamentally transformed over the next five years.

It also urges action by companies and countries, recommending the creation of a 'digital balance sheet' and offering an agenda for chief executives and policymakers to build their digital advantage.

"No company or country can afford to ignore this development. Every business needs to go digital," said David Dean, a co-author of the report and a senior partner at BCG.

Joerg Hildebrandt, Partner and Managing Director at BCG Middle East said, "The findings of this report are particularly relevant for the Middle East as this is one of the fastest growing regions in terms of Internet and smart phone penetration."

By 2016, nearly 70 percent of the Internet users in the G-20[1] will be from emerging markets, up from 56 per cent in 2010. China will have nearly 800 million Internet users -- about the same number as France, Germany, India, Japan, the UK, and the US put together.

According to the report, countries such as Argentina, Brazil, Indonesia, and Mexico are going straight to social, with more than 90 per cent of Internet users engaged in social media. In these countries, social media are used more extensively than in developed markets in the creation and sharing of content.

Across the G-20, USD 1.3 trillion of goods was researched online before being purchased offline -- representing 2.7 per cent of GDP, or more than USD 3,000 per connected household.

In the largest G-20 economies, the perceived value that consumers place on the Internet, above what they already pay, is USD 1.9 trillion or USD 5,000 per connected household.