Earlier this month Bradd Libby took another look at the Google Economy in a post entitled “What’s Google’s Value?”. He examined some of Hal Varian’s claims in relation to the amount of sales generated by Google’s search engine and the value of the time it saves users in not having to make a trip to the library.
Bradd finishes the piece by posing the question
So, either Google is a free and fair marketplace and therefore they are getting paid what the net value they create, $8.8 Billion per year. Or, Google’s value is $119 Billion per year and Google is only capturing a small fraction of the value they, as a publicly traded company, are legally required to do. My question is: Which one is it, Dr. Varian?
I have covered my thoughts on the value of the Google Economy before (See Google Economics). This time I would like to re-examine the value Google to the US economy by once again exploring the simple question “Just how much is a Top Page ranking on Google worth?” and seeing where that may take us in relation to understanding the true impact of Google on the US economy.
I’ll begin the discussion with this comparative study on the value of a Top 10 ranking on Google released by Search Engine Watch today.
“Websites ranked number one received an average click-through rate (CTR) of 36.4 percent; number two had a CTR of 12.5 percent; and number three had a CTR of 9.5 percent. Being number one in Google, according to Optify, is the equivalent of all the traffic going to the sites appearing in the second through fifth positions.” - Search Engine Watch
It is yet another study that provides compelling evidence of the value of investing a lot of time, money and energy in trying to obtain top spot on Google. And yet I wonder does the summarized data provide an accurate picture of the value of a Top Ranking on Google?
As I have said before the Google experiments I have been conducting here on excapite over the past 12 months suggests there is very little correlation between obtaining Top Spot on Google and increased Traffic. There is no doubt that an investment in obtaining a high page ranking guarantees you a higher number of search impressions but to what extent does this pure page ranking factor into the click-through equation is another question.
My simple experiments prove there are many variables that determine the average CTR for a page (e.g.Image vs Words). There are pages (or should I say images) here with page rank positions in excess of 100 that have a higher CTR than pages of words that have achieved Top Spot on Google.
One thing I do know is the average CTR we have achieved on over 500 posts is 1.8%. That well over 90% of the search traffic is generated by images rather than words and search traffic isn’t sticky… put more simply, apart from the occasional exception to the rule, it is a one hit wonder.
As I have said many times before Search should be considered as more of an annuity for old content than a primary driver of traffic. The key to success on-line isn’t Search its obtaining that all to rare and valuable shared link from a recognised web authority.
Put more simply a link back to your site from a top web site is worth gold. Top spot on Google not so much… unless of course you hold the secret key to unlocking Google’s potential… a well-known BRAND.
In the end this was all the excapite experiment was about. It was a myth busting experiment to discover if you could build a brand online for free using Google.
After 90 days the answer was definitely NO. After 6 and 12 Months the answer was still NO. And now after 18 months I’d have to say the answer is definitely NO. Myth busted as they say.
When it comes to words prior Brand Awareness is central to success on the Google. Images and other media much less so.
Put simply if you are looking for “Free” success on Google then start building that brand elsewhere so that when people find you on Google they are more likely to click-through that free search result all that investment in SEO has delivered.
The ad-hoc data collected from my experiments suggests that success of Google – and for that matter the other social media – is a lag indicator of brand awareness rather than a lead indicator brand awareness.
Which makes the spectacular growth in paid search advertising all the more interesting. eConsultancy have released a chart illustrating how Search Engine Advertising in the USA has grown from a $4.1 Billlion in 2004 to a $16.6 Billion business in 2010. As these figures released by the IAB demonstrate search has grown its share of the online advertising market from 40% to 47% since 2004.
As I proved a few months back, if you take Google out of the equation online advertising has basically flatlined over the past 7 years.
Take Google’s Search Engine out of the online advertising equation and nobody would be looking. The Online Advertising Experiment would well and truly be over.
This then is the true measure of Google’s impact on the US economy. Its arrival breathed new life into the ailing web economy and the VC investment community that benefits from this online growth.
But what about the wider economy?
To discover the real value of Google to the wider US economy I think we first need to be able to discover the answer this very simple question:
Just how much of this growth in paid search advertising is web sites and web start-ups trying to build traffic to their site so they can profit from the sale of on site advertising (e.g. Google or Display)?
Once we can establish the extent of the online advertising feedback loop and the total value of the Search Advertising Feedback Loop that has been created by the gaming of the Google Economy over the past 7 years then I think we will be in a stronger position to quantify and verify the value of Google to the US economy.
Of course this feedback loop is extremely difficult to quantify and qualify. But I think it would be invaluable for media planners to have access to the metrics that allow us to discover to what extent the US Web Economy is a closed Loop System.
In the meantime perhaps we just need to accept the simple reality that in the wider scheme of things the economic value of Google, at least in relation to achieving sustainable growth in the US economy, has so far been negligible.
Upon reflection I tend it look upon the success of Google (and Facebook) as being largely symptomatic of the wider challenges the US economy faces today as it tries to adjust to life in the age of Internet. Both are touted by US commentators as America’s first generation of 21st Century success stories and yet they are perhaps more illustrative of just how much the US economy has failed to grasp the opportunity laid before it back at the birth of the World Wide Web.
Here was a multi-media communications technology that would allow America to export its ideas, products and services to the world. 15 to 20 years on we discover that here was a technology that helped the rest of the world to import its ideas, products and services to America.
Perhaps no chart illustrates the failure to rise to the challenge than this chart illustrating the steady decline in entrepeneurialism [Adjusted for population growth] in the US since 1990. Even accounting for the impact of the GFC in 2008 the decline in US Entrepreneurialism mirrors the growth in the web economy. So, despite all the hype coming out of the Valley, the US Economy is struggling to come to terms with the impact of the Internet.
This current wave of creative destruction brought on by the Globalism fueled by the Internet and “cheap” oil reads more like the US Economy “surfing into the heart of darkness” than “surfing the edge of chaos to future prosperity”.
At the heart of the problem is of course the simple fact that a generation of America’s best and brightest chose Banking and Finance before the business of enterprise and innovation.
There has been a lot of speculation over the past week about the possibility of the US defaulting on its debt repayments. Most of it fretting over the loss of face of the world’s only superpower not being able to pay its bills for the first time in its short history.
This is of course fundamentally wrong. Readers of American Economic History will know that the US has defaulted on its foreign debt commitments before. Most notably at the birth of the nation just after the War of Independence.
So the situation America finds itself in today is not that unique.
What will be unique is the response America chooses to implement to resolve the problem.
It can continue to rationalize the situation with more Google economics or, it can continue to blow bubbles with more Social Media and Facebook economics, or it can get back down to business and focus on real world economics (i.e. Making real money in the real world).
The first step? Figure out how you can use the internet to sell more American Products and Services to the rest of the world…. After all, if America has become the market of choice for the rest of the world, isn’t it about time America made the rest of the world its market of choice?
My message today. It’s time for America to stop sharing and start trading (again).
Posted on April 22, 2011
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