Google recently released the annual Economic Impact Report, which attempts to estimate the amount of revenue that Google drives to U.S. businesses each year. As a result of AdWords and AdSense, Google claims to have driven a whopping $80 billion of economic activity last year.
Margo Georgiadis, Google’s VP of America Sales, posted the following to the Google blog:
“In 2011, Google’s search and advertising tools helped provide $80 billion of economic activity for 1.8 million advertisers, website publishers, and non-profits across the U.S. You can see the state-by-state breakdown on our economic impact website. It’s a fact that the Internet is creating jobs and helping the American economy grow. And we’re proud to be a part of that process.”
Although the $80 billion figure is quite impressive, it takes some interesting math to reach that number. Google estimates that every business in the United States that uses AdWords will earn $2 of revenue for every $1 spent on AdWords. In addition, Google believes that businesses will receive five organic clicks for every single paid click and that these clicks will also generate approximately $2 in revenue per visitor. However, for the sake of the report, they reduced the profitability of an organic website visitor to $1.40, which is 70% of the initial figure. Below is Google’s formula for the economic impact of the AdWords program:
AdWords ROI Formula: 2(spend) + .7 x 5 x 2(spend) – (spend) = 8(spend)
Since Google began releasing this financial data in 2009, the search giant has steadily increased its economic impact each year:
2009 – $54 Billion
2010 – $64 Billion
2011 – $80 Billion
The $80 billion estimate does not include Google Maps, YouTube, Google’s own hiring, or the potential savings for consumers that use Google products.
Google indicates that $8 of profit per $1 spent on AdWords is a conservative estimate. Do you agree?