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Clicking for Dollars

Friday, August 26, 2011

A story that caught my eye on one of my preferred RSS feed sites, McKinsey Quarterly, tells of recently conducted research into how Internet search has benefitted the global economy. This seemed to me a bit like trying to quantify the effect of sunshine on marriage proposals.

Measuring the Value of Search outlines the comprehensive computation of how billions of mouse clicks turn into economic value. But where do you even start to figure this out? McKinsey gave it the old college try and came up with some brilliant techniques to measure the immeasurable.

First, they estimated the overall value of Internet in 2009 at $780 billion based on the assumption that each search was worth about 50 cents.

They then figured that 69% ($540 billion) flowed directly to global GDP in the form of e-commerce and higher productivity. The remaining 31% is not captured in GDP numbers but is seen as benefits to people in the form of finding lower prices and the convenience of quick access to needed information. They estimated the value of these benefits to be about $20 per month for European and American consumers and up to $5 per month in countries with lower disposable incomes.

The research determined that the value of searches in 2009 translated to 2% of retail revenues in developed nations, reflected either in direct sales or online marketing that actually resulted in getting people to the bricks and mortar store.

Previous studies only measured the overall commercial value of Internet search. McKinsey points to the economic benefits of increased knowledge and informed decision making. Pretty amazing stuff, really. By the way, $780 billion is equivalent to the GDP of the Netherlands. And that was two years ago.

Sandra Altner

Posted by Sandra Altner at 12:00 AM