At the Web 2.0 Expo, Google’s Chief Economist Hal Varian spoke about two elements: 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). 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.
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). For comparison Google’s global market cap is $187.04 billion.
But that $119 billion number 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.”