Value of Internet Searches

A while ago McKinsey published a study on the rising value of internet search. The study focused on five key developed and developing economies — Brazil, France, Germany, India, and the United States — identifying nine activities that are primary sources of search value, as well as 11 constituencies that benefit from search. Since we learnt about search engines last class weekend, I thought it would be interesting to post few highlights from this study:

This study identifies nine sources of search value. They are:

a. Better matching: Search helps customers, individuals, and organizations find information that is more relevant to their needs.

b. Time saved: Accelerates the process of finding information, which in turn can streamline processes, such as, decision making and purchasing.

c. Raised awareness: Increase product and brand visibility.

d. Price transparency: Help users find the best price.

e. Long-tail offerings: Help consumers seek out niche items that relatively few might want, but have a greater profit potential for suppliers.

f. People matching: Help people discover each other -- for social or employment purposes.

g. Problem solving: Help people find answers to questions, ranging from showing how to build a chair to questions on advance scientific research.

h. New business models: Help develop new business models (Ex: content aggregation).

i. Entertainment: Given the quantity of digital music and video available, search creates value by helping to navigate content.

The study also contains few interesting data that shows the benefits of search:

a. The total value of Internet search across the global economy was $780 billion in 2009, equivalent to the GDP of the Netherlands or Turkey. By this estimate, each search is worth about $0.50. The study notes that the speed at which the search environment is growing, this figure has probably long been surpassed.

b. Search accounts for 1.2% of GDP in US, 0.9% in Germany and France, and 0.5% in Brazil and India respectively.

c. The value of search to retailers was estimated at 2% of total annual retail revenue in developed countries and 1% in developing countries.

d. About 204 million people in the 5 countries created their own online content!

e. According to McKinsey's own estimate, the value created by search for consumers was around $20 per consumer per month in developed economies and about $2 to $5 in developing economies.

Despite the clear benefits of search to the economy, the study concludes that it would be a mistake to think about search only in monetary terms. Search assists people in myriad ways in their daily lives (such as, help find information in times of emergencies, to seek out people with similar interests, etc). Importantly, it also shifts the balance to empower individuals or small organizations with something to share globally that would otherwise reach only a small audience. None of these may have economic value, but they surely affect people's  lives.

Future of search:

- Value of search will only grow as we come to rely upon it more and more.

- Search is at an early stage of its evolution. For example, searches for video or photographic images still largely depend on text searches by file names or key words.

- According to another study, the amount of digital information will grow by a factor of 44 annually from 2009 to 2020! The challenge for the search engine is to ensure that the search is still quick and results relevant.

- Use of vertical search engines is on the rise. For example, ten times as many product searches are executed on Amazon and ebay as on Google product search. Interest in semantic search engines (which attempts to understand more accurately the underlying intent of a search) is also on the rise.

- Relevant search results are increasingly deemed to be personalized. The advent of smartphones, tablets, and other web-connected devices has increased the potential of more personalized searches.