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Google’s Hal Varian “Google’s Value to US Users and Advertisers is Over $119B”

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.

Web 2.0 Expo, Google's Chief Economist Hal Varian

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.”


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