Hey, wait: Google’s economist left out the “on the other hand”

google report

Google today issued a report (pdf) that claims $54 billion is a “conservative estimate of Google’s economic impact on businesses across the U.S.” The report breaks down how they arrived at those numbers and even provides a state-by-state analysis of how that “business generation” is spread out across the entire country. The report and its state versions were part of a well-oiled political advocacy campaign that took place in Washington and in state capitals across the nation.

While I’m a fan of much that Google does — Google maps is my constant companion — I find the report rather disingenuous, if not misleading — even while I’ll be the first to say it was brilliantly conceived and executed.

First, a disclosure for those who have never visited this corner of the web. While I’m not an economist, I play one on this blog. And when I’m not on this blog, I run a small business that created and maintains a large wiki filled with small business information called SmallBusiness.com.

But I’m not an economist, so you may wonder how I could challenge the findings of a study that has been blessed by Google’s professional economist. Well, I am a long-time adherent to the economic theory that is expressed in the following equation: 1 (Economist) x 2 (Hands) = “On the other hand” after each sentence.

So, whenever I hear an economist explain something without throwing in the “On the other hands,” I figure one doesn’t need to be an economist to figure out what’s missing from the methodology.

So I looked, and the other hand seemed big enough to smash a Mack Truck.

I agree, some of Google’s small business customers sell more products and services thanks to Google. I agree they are being conservative in their estimates of that advertising’s impact on the bottomlines of those companies that have the correct products to benefit from the effective use of its services. However, on the other hand, one could easily argue that Google’s role in the economic activity measured in the report is not that of a “generator” of incremental business activity. Rather the company’s function is that of a marketing platform with which consumers choose one supplier over another. In other words, economic activity was not “generated” (implying the creation of new economic activity where non existed, — “ex nihilo”) by Google, but rather, Google merely played a role in facilitating transactions that, bottom line (or, net-net), merely shifted economic activity from one business to another business — and from the advertisers who previously facilitated such transactions into Google’s coffers.

So on one hand, Google certainly assists millions of small businesses who benefit greatly from participating in their Adwords program. But on the other hand, it generates lots of revenue from small companies that receive little or no benefit because they write lousy ads or choose the wrong keywords. And on one hand, Google and those small businesses have an extremely positive impact on specific local economies across the country. But on the other hand, what about the Bed & Breakfast in Maine that lost a reservation due to its lousy Adwords ad to the Bed & Breakfast in Vermont that had a better ad? And what about the Yellow Pages and local newspaper that used to get those advertising dollars that go to Google? The employees of those Yellow Page companies sure aren’t benefiting from Google’s economic impact.

So, on the other hand, Google’s true “economic impact” on a community should likely be measured in a way that balances the economic patterns it disrupts with the new-model of business it generates.

pew survey google

According to the Pew Research Foundation,
people have high regard for big tech companies and small business.
On the other hand, people may regard the Taliban higher than such
institutions as non-tech big corporations, the federal government and
congress.

And as for all the “we and small business are critical to your congressional district” reports?

Again, I love lots about Google. I certainly believe Google should promote itself however it can. And Google should lobby lawmakers with any facts and figures it can conjure up to support its side of their narrative (which I’m guessing, I’d agree with). But people should also take with a grain of salt any claims a gigantic company like Google makes when it wraps itself up in the banner of small business. When that happens, look for the lobbyist who is lingering in the shadows.

Google, like anyone who saw the findings of the recent Pew Foundation research into people’s attitudes towards different institutions knows that small businesses and technology companies are popular with the American people while big corporations, government and lawmakers are as popular as a BP executive at a Greenpeace rally. By providing state-by-state breakdowns of the “business generated” by Google, the company is sending a none-to-subtle claim to lawmakers that goes something like this: Harm Google and you harm small businesses. Harm us both and you’re harming 1. The economy in your home district 2. The only kind of big company the voters in your state actually like.

Sure, it’s likely over-stretched hype and fuzzy economics at best, but it’s good for lots of blog posts, tweets and sound bites. And that’s what affecting public policy is all about.

Sure, Google helps lots of small businesses improve their search advertising and helps them grow.

But Google is to 2010 what GM was in 1953. And despite what some may believe, what’s good for Google isn’t always what’s good for America. Even when, on the other hand, it appears to be.