Google Events Offer a Defense to Criticism

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Google Inc. highlighted its positive impact on
small business and the broader economy through a report and series of
news conferences on Tuesday, at a point when the online giant is facing
mounting criticism over its privacy practices and alleged
anti-competitive behavior.

The Mountain View company released an internal analysis that found it
generated an estimated $54 billion in economic activity throughout the
United States last year, led by $14.1 billion in California. Google on
Tuesday held news events at 11 small businesses across the country that
it said benefited from its offerings, including the Happy Hound Play and
Daycare in Oakland.

Some observers said the move was, at least in part, a public
relations tactic designed to mitigate recent controversies surrounding
the company. Those would include antitrust claims and scrutiny from
competitors and the government, as well as the recent revelation that
Google vehicles equipped to collect data for its mapping services had
inadvertently captured personal information from unencrypted wireless

"There’s a heavy PR element," said Greg Sterling, founding principal
of Sterling Market Intelligence. "It wants to show that it’s a friend to
small business and that it contributes to the health of the economy
broadly; that it’s not this huge corporation taking over the world."

But at least one vocal critic of the company said the report
overstates Google’s contributions. The company didn’t generate this
economic activity so much as facilitate it, said John Simpson of
Consumer Watchdog. There were other businesses that connected companies
with customers before Google was founded 12 years ago, and the report
failed to take into account lost revenue and jobs within those
industries, notably media and advertising, he said.

"They often say themselves that they’re a very disruptive company,"
Simpson said. "If you want to sit down and do a serious analysis of the
economic impact, you’ve got to take both sides of all this into

Google tallied its economic contributions by estimating the business
generated by its search engine and the ads served up with queries; the
amount of money generated for third-party online publishers through the
ads it places on those sites; and the money it gives away directly
through its nonprofit arm.

Many assumptions

Calculations for the latter two categories were straightforward, but
the first required several assumptions, which the report called

The company estimates that businesses bring in $2 in revenue for
every $1 they spend on AdWords, Google’s online search advertising
program. The model was developed by Hal Varian, Google’s chief
economist, based on the observed activity of a large sample of
advertisers, according to the report.

Separately, the company makes the assumption, based on the work of
two independent academic researchers, that businesses receive five
clicks on their search results for every one click on their search ads.

Public companies typically stick to reporting their internal
financials, rather than playing up economic ripple effects. But it’s not
unheard of.

In 2004, as Wal-Mart Stores Inc. was facing stiff public and union
opposition to its plans to open 40 Supercenters in California, the
company rolled out full-page ads in major newspapers emphasizing its
contributions to the Golden State.

The ads noted that the company handed over $650 million in California
sales tax revenue the previous year and bought more than $8 billion in
goods and services from 4,600 state businesses.

Dennis Woodside, vice president of Americas operations at Google,
denied the allegation that the report was designed to deflect criticism.
Rather, he said, the goal was to provide greater transparency of the
company’s business model and to help small businesses understand the
benefits of working with Google.

"The reality is, Google is an engine for economic growth for small
business," he said, during the Oakland news conference.

Happy customer

Suzanne Golter, the owner of Happy Hound, agreed. She has been
advertising on Google since opening her businesses more than six years
ago, and estimates that 70 percent of her customers arrive via the
company’s search engine or AdWords.

She now employs 33 people and plans to open a second dog day care
facility next year.

"I don’t think I’d be as successful as I am today without Google,"
she said.

E-mail James Temple at [email protected].

Consumer Watchdog
Consumer Watchdog
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