We derive a conservative estimate of Google’s economic impact in each state by examining the economic value provided by Google Search, Google Ads, Google Cloud, and Google network properties such as AdSense and AdMob, Google Ad Grants, YouTube, and Google Play.
To estimate the economic impact of Google Search and Ads, we rely on two conservative assumptions. First, we assume that businesses make an average of $2 in revenue for every $1 they spend on Google Ads. Our chief economist, Hal Varian, developed this estimate based on observed cost-per-click activity across a large sample of our advertisers; his methodology was published in the American Economic Review in May 2009. Our second assumption is that, overall, businesses receive an average of five clicks on their search results for every one click on their ads. This estimate was developed by academic researchers Bernard Jansen and Amanda Spink based on sample search log data and published in the International Journal of Internet Marketing and Advertising in 2009.
If search clicks brought in as much revenue for businesses as ad clicks, these two assumptions would imply that businesses would receive $11 in profit for every $1 they spend on Google Ads. This is because if advertisers receive 2x as much value from Google Ads as they spend on Google Ads, and they receive 5x as much value from Google Search as they do from Google Ads, then the total profit they receive is 11x what they spend: 2(spend) + 5 x 2(spend) - (spend) = 11(spend).
However, clicks through search results may not be as commercially valuable as ad clicks, so we want to be conservative. We estimate that search clicks are about 70% as valuable as ad clicks. This means advertisers overall receive 8x the profit that they spend on Google Ads: 2(spend) + .7 x 5 x 2(spend) - (spend) = 8(spend).
Therefore, we conservatively estimate that for every $1 a business spends on Google Ads, they receive $8 in profit through Google Search and Ads. Thus, to derive the economic value received by advertisers, we multiply our Google Ads revenue on Google.com search results in 2023 – what advertisers spent – by 8.
We estimate the economic impact of Google Cloud based on the benefits that it generates for its users. We rely on American companies’ investments in Google Cloud for this calculation and make two core assumptions. First, we assume that Cloud technology is driving revenue growth and cost savings across both small and large organizations. Second, we assume that every dollar invested in Cloud services by our users generates a net return. The methodology we use does not include any Cloud services that are provided for free.
Like the economic impact of Google Search and Ads, we rely on two conservative assumptions to estimate the economic impact of YouTube Ads, based on analysis of actual campaigns run on YouTube. The first is the assumption that advertisers are willing to pay twice the amount of what they actually spend. The second is that brand advertisers receive, on average, more organic views on their channels than paid views. Then, using similar methods used to determine the economic value of Google Search and Ads, we were able to estimate a total surplus, or profit, for advertisers based on what they spent.
The economic impact of Google Network Properties, YouTube, and Google Play is based on the estimated amount we paid to publishers, creators, and developers in each U.S. state in 2023 for placing our ads next to their content and from app monetization.
Similarly, the impact of Google Ad Grants is the total amount spent by grant recipients in 2023.
Total economic value for each state is estimated as the economic activity provided to businesses, publishers, nonprofits, creators, and developers by Google Search, Google Play, YouTube, Google Cloud, and Google advertising tools in 2023.
This is an attempt to estimate the economic impact of Google’s core search and advertising business. In search and advertising, we derive a conservative estimate of the impact of our tools on businesses, publishers, nonprofits, developers, and creators. We leave out estimates, such as the cost savings for consumers who are now able to find the information they need more easily than before. We also do not include our employees’ economic impact or that of other major products, such as Google Maps and Google Analytics. So while we are confident in our estimates, consider them a lower end of Google’s true economic impact.