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Google’s Hal Varian on Economic Value of Google to US Advertisers and Customers
Yesterday at the Web 2.0 conference in San Francisco, Google’s Chief Economist Hal Varian dedicated his keynote speech to explaining the economic value of Google advertising and search.
In an attempt to quantify the value of Google, he spoke about the value of Google ads to advertisers, publishers and charities, and the value of search to users.
Varian explained that in terms of search clicks Google advertisers get back about 7 times what they spend in value of ad clicks plus organic clicks. When it comes to publishers, they are receiving AdSense revenue which is 67% of the ad revenue, while non-profits get value of search services provided to them by Google. Varian calculated that the total value in US to advertisers, publishers and nonprofits is $54 billion.
Calculating the value of search to users was a bigger challenge, and Varian pointed to a study called “A day without search engine” by Yan Chen at the University of Michigan. As a part of the study, students were hired to answer the same questions using A) Google and B) Library.
Students who were using Google to find answers got the same or even better quality answers and saved 15 minutes per search. It took an average of 22 minutes for students to locate the answer using the library books, as opposed to an average of 7 minutes needed for the same search using Google.
Varian calculated that Google search saves people 3.7 minutes a day which translates into $1.37, the number he got using the average US hourly wage of $22. Multiplying that with 365 days in a year, Google saves users $500 yearly. He then multiplied that with 130 million, which is the number of employed people in the United States, and got $65 billion.
The total value of Google to US users adds up to more than $119 billion.
Watch the entire keynote video below: