What’s the purpose of this report?
The purpose of the report is to highlight Google’s local economic impact in all 50 U.S. states, plus Washington, D.C. We’ve talked for years about the kind of economic impact that Google has, but we’ve often heard in response, “Show us the data.” We heard that feedback, and we’re releasing that data for the ninth time.
In compiling this document our goal was to estimate the net value Google provides to advertisers and publishers. If Google were suddenly to disappear, what would happen to Google’s advertisers, publishers, and grant recipients in the days immediately following Google’s disappearance?
Of course, if Google were to disappear overnight other providers would eventually step in to fill the void. So the analysis we have conducted here should be considered a short-run analysis only.
How did you come up with these estimates?
We draw from three data sources to derive a conservative estimate of Google’s economic impact:
- The revenue we received from Google Ads on Google.com search results in 2017
- The dollars we paid to our AdSense partners in 2017
- And the in-kind donations we made to nonprofits through Google Ad Grants in 2017
Our estimate is comprised of a limited part of our business and relies on conservative calculations. For example, it does not include the cost savings for consumers who are now able to find the information they need more easily than before. It also excludes the economic benefits of other products, such as Google Maps and YouTube. We hope to be able to include these sources in future reports.
How did you determine that the value of Google Ads is $2 for every $1 spent?
Our chief economist, Hal Varian, based his estimate of the economic value provided by Google Ads on observed cost-per-click activity across a large sample of our advertisers. Assuming advertisers are maximizing profits, Hal estimates the value enjoyed by advertisers is between 2 and 2.3 times their total expenditure on Google Ads. We use the lower end of the estimate to be conservative. To learn more, you can download Hal’s study.
Can you say more about how you determined the 5:1 ratio for search and ad clicks?
This ratio refers to 5 clicks on an advertiser’s search results for every 1 click on their ads. In the study we cite, academics Bernard Jansen and Amanda Spink used data from the search engine Dogpile, and this was the ratio they observed in that data set (the exact figure was 5.3:1 but we rounded down to be conservative). To learn more, you can read their study.
Why do you aggregate the number of advertisers and publishers, and the value they receive, rather than break them out separately?
As part of our financial disclosure policy, we do not explicitly break out the exact number of advertisers and publishers. We also do not break out the revenue we receive from U.S. advertisers and pay out to U.S. publishers separately.
You said that clicks on search results aren’t necessarily as valuable as ad clicks. Why is that?
There is evidence that ad clicks are more valuable than search clicks. For one, advertisers control the message of their ads. And many advertisers choose to buy ads even when they are high up in the search results. If we counted the search clicks one-to-one with ad clicks, the value Google provides to advertisers would be larger than the number we report. To be conservative, we do not assume that search clicks are as valuable as ad clicks and instead assume they are 70% as valuable.
Where can I read more about your methodology?
How can my business use Google tools?
Check out our Business Solutions page.
Where can businesses just starting out on the web go for next steps?
Get Your Business Online is a program that helps U.S. small businesses establish a web presence through free business listings and websites, so they can be found online and grow. Visit gybo.com to learn more.