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 fourth time.
We draw from three data sources to derive a conservative estimate of Google's economic impact:
Our estimate is comprised of a limited part of our business and relies on conservative calculations. For example, it doesn't include the economic benefits of search results for consumers, the impact of our hiring or employees, or the impact of products like Google Maps or YouTube. We hope to be able to include these sources in future reports.
Our Chief Economist Hal Varian based his estimate of the economic value provided by AdWords 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 AdWords. We use the lower end of the estimate to be conservative. To learn more, you can download Hal's study.
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.
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.
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.
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