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Monday, May 31, 2010

Google Says it Helps Generate $54 Billion for Businesses and Nonprofits

LA Times

A report by the Internet giant says $14 billion of that economic activity is in California, where it is based. Critics say the report is an attempt to spruce up its image as it faces greater scrutiny.

Google Inc., hoping to burnish its image, said it helped generate $54 billion in business activity for companies, Web publishers and nonprofits last year.

More than $14 billion of that economic activity was in California, where it has more than 9,000 employees and has its headquarters, the Internet giant said in a report released Tuesday.

Google said it calculated the revenue generated by its search engine and the ads that run next to the results as well as the amount it pays to websites that run the ads and grants made by its nonprofit arm.

Few question that Google, like other major technology companies such as Apple Inc., has a huge ripple effect on the nation's economy. Google has also been a boon to small businesses that use its products to get noticed and to get customers.

But critics say Google is emphasizing its role in creating jobs and economic development to counter a growing perception on Capitol Hill that it abuses its dominant position in online advertising. Economic impact studies are commonly employed by technology companies campaigning for support in Washington and elsewhere. Microsoft Corp., for example, has done a few.

Google has come under increased scrutiny from lawmakers, regulators and privacy watchdogs. The Federal Trade Commission took six months to approve its $750-million acquisition of mobile advertising startup AdMob. Two recent developments also did not help Google's image: missteps with social networking service Buzz and collection of private data over WiFi networks.

"Google has lost control of its image. Some have started to position Google as the evil company," said technology analyst Rob Enderle, who has done consulting work for Microsoft and other tech firms. "Google is rolling out a marketing campaign to get people to look at them in a more balanced and positive way so they don't get pounded by politicians."

A spruced-up image is just as important in attracting investors, Enderle added. "People have trouble investing in a company that has a declining image," he said.

Google fell 9 cents to $477.07 in Nasdaq trading. Shares have declined 24% so far this year.

Google, which had $23.7 billion in revenue last year, is also facing intensifying competition from rival Internet upstarts such as Facebook Inc. and Twitter Inc. The report prepared by Google chief economist Hal Varian breaks down Google's economic effect in all 50 states and includes profiles of small businesses.

The company said businesses bring in $2 in revenue for every $1 they spend on AdWords, Google's online search advertising program. Separately, Google assumed that businesses get five clicks on their search results for every one click on their ads. Based on that, the company calculates that businesses get $8 in profit for every $1 they spend on AdWords.

Google said the estimates were conservative. California is the major beneficiary of Google largesse in part because the company has its headquarters in Mountain View, Calif.