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Having fun, writing about the stuff I like

The World According to Google

Oscar Foulkes June 2, 2009 Uncategorized No comments

The Big Mac Index aims to measure purchasing power parity between different currencies. It’s informal, no doubt entertaining to economists, and also really interesting when employed as a rate of earnings.

While very much more is known about the commercial and social realities of the internet than ten years ago, we are still struggling to get to grips with all of its complexities. It could be argued that Google is to the internet what the Big Mac is to mass-market consumerism.

Google makes its money by getting advertisers to bid for the keywords that will activate their advertising. These ads run as sponsored links on Google search pages, as well as in GoogleAds sections on millions of websites, who get a share of the proceeds from Google. They even appear adjacent to email messages on Gmail, where they are triggered by the content of emails being viewed. Google earns money every time somebody clicks on an ad, at the rate that the advertiser has bid for the relevant keyword.

Given that within Google’s AdWord system search words or phrases are bought on a bid system, what can one learn from their market value? Or, more precisely, what does it say about the businesses one should be involved in?

For starters, I clearly haven’t chosen very well. Getting top billing adjacent to searches based around “South African wine” costs less than a dollar per click. However, the word “champagne” – at 84c – is cheaper than “red wine” searches, which will cost around $1.00. Despite the stellar prices of the First Growths, “Bordeaux red wine” doesn’t sell at a premium to any other red wine search, which should be of concern to those investing in chateaux.

The assumption is that businesses that make above average profits would be prepared to bid more for certain keywords. Their customer acquisition is more expensive, but clearly it’s worth it.

Is it a reflection of the state of people’s desperate levels of indebtedness that searches relating to “unsecured loans” cost in the vicinity of $10? In other words, the company that grabs them as customers is going to make a heap of money out of them. Similarly “forex trading” type searches, which also go for around $10. I was amused to see that “teach me to trade forex” costs $12, but “profitable trade in forex” is only 10c. What does that say about one’s prospects of making money trading the Mexican Peso against the Hungarian Florint?

Business consultants appear to do OK – the various search strings they put together go for between $6 and $13. Waiting in the wings for slip-ups are those peddling “bankruptcy attorney”, at a bid of $7.58.

“Wedding catering” goes for $1.87, but races up to $3.78 when the search is confined to New York. Unsurprisingly “Utah wedding catering” can be had for a mere $1.15. Of interest is the apparent discrepancy between the bids for “become a wedding planner” ($2.38) and “wedding planner” ($1.39). Perhaps there’s more money to be made teaching others to be wedding planners than dealing with bridezilla oneself.

In the Pets category, the leading search (at about 120 000 per month) is “puppies for sale”. However, those offering puppies are only willing to bid 47c to get in front of those searchers’ eyeballs. Comparatively, “pet insurance” (about 82 000 searches per month) goes for $7.19 – perhaps this is a career move I should be considering (I wonder if AIG’s need for cash is so desperate that their pet insurance division could be had for a good price?).

Snobbery is alive and well in Google society. I would have thought that a cookery school isn’t a dramatically different operation to a culinary school, but the latter search is almost ten times as expensive. Almost any search involving the word “culinary” will cost in the advertiser in the vicinity of $10. Similar searches based upon the word “cookery” are between $1 and $2 per click.

While there is an extremely good case to be made for avoiding any place where Big Macs are on sale, the Big Mac Index suggests that one should avoid living in places where it takes the longest to earn the cost of a Big Mac (97 minutes in Bogota), or where they are most expensive ($7.88 in Norway).

Anyone wanting to start a new business (or change careers) could do very much worse than researching the cost of advertising that business on the Google Adwords platform.

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