Google’s Value To US Users And Advertisers Is Over $119B, According To Google
Google’s Chief Economist Hal Varian took the stage today at Web 2.0 Expo to break down the totality of Google’s value. He spoke about two elements of value: The value of Google to users and the value of Google to advertisers.
In order to estimate the value of Google to advertisers, Varian used a model to estimate the value vx – c(x) (where v = value per click, x = number of clicks and c(x) = cost of clicks) and then did some “back-of-the-napkin” math. The bottom line? Google’s value to publishers and advertisers is $54 billion.
In order to calculate the value of Google to users, Varian cited a the “A Day Without A Search Engine” study, which plotted students searching for the answers to questions in a library, as opposed to those that used Google to get their information. Students who searched in the library ended up averaging 22 minutes where students using Google took an average of 7 minutes, saving 15 minutes.
Then Varian did some more “back of the napkin” math and tried to glean how much time Google saves the average US user daily (because of a question “demand curve” which holds that the cheaper in terms of time question asking becomes, the more we ask).
Varian came to the conclusion that Google saves us 3.75 minutes per day, and then used the average US hourly earnings numbers ($22) to calculae that Google saves users $1.37/day. That multiplied by 365 days in a year that equals $500. Varian then multiplied that number by, 130M, the number of people employed, to get $65 billion.
Adding those two bottom line $65 + $54 numbers together, says Varian results in the total value of Google to US users ($119 billion). But that doesn’t take into account extraneous factors like the valued to non-employed, etc. Says Varian, “You should think about these numbers about an underestimate. The value of getting answers to questions immediately is a pretty big deal.”