14 DAY TRIAL // During the US National Small Business Week, Google is taking the opportunity to boast just how much it does for the economy. The company says that its advertising and search tools created as much as $64 billion of economic activity in the last year.
Google uses a rather simplistic formula to arrive at this, by assuming that companies get an average ROI for each dollar spent on its ad network, but says that there is more complexity that meets the eye.
"Today we’re announcing that Google provided $64 billion of economic activity to businesses, website publishers and non-profits in 2010. This is an 18% increase from the economic impact total in 2009," Claire Hughes Johnson, Vice President of Global Online Sales at Google, wrote.
"Here’s how it works: for every $1 a business spends on Google AdWords, they receive an average of $8 in profit through Google Search and AdWords," she explained.
Google says that advertisers generate $2 in revenue from each $1 they spend on advertising on its network. On top of that, they get about five search results clicks for every ad click.
Assuming that search result clicks are not as effective as ad clicks, since the user intent is less clear, Google estimates that search clicks are only 70 percent as effective, in terms of revenue generation, as ad clicks. Add this all up and you get the $8 figure.
The figures only refer to Google's search and ad business, its other products create value for businesses and consumers alike, so the company says that its economic impact may be even bigger.
Of course, all of this is based on quite a lot of estimates and, although Google says it's confident on its reasoning, has to be taken at face value. Clearer than the figures themselves though is that Google does indeed drive quite a lot of growth for a lot of companies.