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Gauging The Size of the Google Economy
Jon Battelle's Searchblog
Posted by John Battelle at 12:20 PM
December 16, 2005

A Fortune Small Biz reporter, Justin Martin, called today and among other questions asked one that I did not have a ready answer for. But it seemed like a very good question, and it'd be neat to have an answer. In short, he asked, how big is the Google economy? We bounced it back and forth, and what he meant by that phrase is the aggregate amount of direct economic impact Google has on businesses large and small. Not an easy thing to nail down, but often you can create useful proxies if it's Friday and you're trying to avoid real work.

I was thinking that you might take Google's gross revenue number, which is projected to be more than $6 billion this year, and then the estimated number of AdWords customers, which I realize I don't have a reliable number for. The last time I wrangled something out of Google was two years ago, when it was about to cross 200,000. So, assuming decent growth (say 25% a year), we're now at what, nearly 300K (OK, 281K, but for all intents and purposes...).

OK, stay with me. I'm not a quant, which is why I'm doing this in public. I know there are quants out there reading, and there are folks with access to better base case numbers, not to mention better ideas about how to do this.

In any case, if you do the division, you have $6 billion / 300K which equals roughly a $2000 spend per AdWords advertiser, if I've kept all my zeroes in place.

OK, so what were the *results* those business got based on that $2000 annual spend?

*That's* a key stat I wish I knew. The average return on an AdWords investment. Anyone care to speculate?

Sure, OK, I will. Let's assume that for every dollar they put in, they got more than one dollar back in sales. Say it's a 10% bump. So that would mean for the $6 billion they gave Google, $600 million in increased sales was created in their businesses. Or, put another way, every AdWords advertiser drove $200 in marginal revenue from their investment in Google.

If that figure is negative, well, Mountain View, we have a problem. If it was 150%, why, I'd like to know that too. Any of you SEO/SEMs out there with a large client base care to give us a clue?

Of course, the other way to measure the Google economy is to simply look at a stock chart....

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