Google, economically and socially, opens the world. Not only can advertisers tailor to markets and advertise more, and more often, but users can ask more questions, and more specific questions. People also can collaborate on answers in ways that aren't possible using other media, such as libraries or forums. Hal Varian converts these impacts into dollars, citing the time saved as a major incentive for use and presenting search engines as a worthwhile investment for both companies and search users.
He presents the value of Google to advertisers in mathematical terms, comparing costs to clicks received, concluding that, in order to make a profit or sustainably advertise, the value the advertiser receives per click must be greater than each click's incremental cost. Within this paradigm, advertisers must decide whether saving money is worth the loss of clicks, or if more clicks are worth the cost of maintaining the advertisement. In order to let advertisers find the best action, Google has created a Bid Simulator, which lets people estimate costs, possible gains, and a rough number of clicks.
Varian's search to quantify Google's value to search users is less clear cut, but he presents a rough estimate of Google's impact on daily life, as well as how unwilling users are to give it up. He cites a few studies that show how much time is saved by using a search engine instead of a library or other resources. There are many times when search engines can answer questions that other resources can't. Varian also addresses situations involving specific questions that require a person or expert to answer, polls, and even questions that lead to spin-off searches.
Hal R. Varian is the Chief Economist at Google. He started in May 2002 as a consultant and has been involved in many aspects of the company, including auction design, econometric analysis, finance, corporate strategy and public policy.
He is also an emeritus professor at the University of California, Berkeley in three departments: Business, Economics, and Information Management. He received his SB degree (Bachelor of Science) from MIT in 1969 and his MA in mathematics and Ph.D. in economics from UC Berkeley in 1973. He has also taught at MIT, Stanford, Oxford, Michigan, and other universities around the world.
Dr. Varian is a fellow of the Guggenheim Foundation, the Econometric Society, and the American Academy of Arts and Sciences. He was Co-Editor of the American Economic Review from 1987-1990 and holds honorary doctorates from the University of Oulu, Finland and the University of Karlsruhe, Germany.
Professor Varian has published numerous papers in economic theory, industrial organization, financial economics, econometrics and information economics. He is the author of two major economics textbooks, which have been translated into 22 languages. He is the co-author of a bestselling book on business strategy, Information Rules: A Strategic Guide to the Network Economy, and he wrote a monthly column for the New York Times from 2000 to 2007.
Resources:
This free podcast is from our Web 2.0 Conference series.
For The Conversations Network:
Photo: UC Berkeley