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Google says it has generated $54 billion in economic activity [Updated]

May 25, 2010 |  8:30 am

Revealing estimates for its economic contributions to the American economy for the first time, Google Inc. said it generated $54 billion in activity for businesses, Web publishers and nonprofits last year.

More than $14 billion of that economic activity was in California, more than any other state, according to a report Google released Tuesday. Google has its headquarters and employs more than 9,000 in the state, it said. 

No question that Google, like other major technology players such as Apple Inc., has a huge ripple effect on the national economy. Google has also been a boon to small businesses that use its products to get noticed and to get customers.

But analysts 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. That is a tactic commonly employed by technology companies campaigning for support in Washington, D.C., and elsewhere. Microsoft Corp., for example, has commissioned economic reports.

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. “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 said. “People have trouble investing in a company that has a declining image,” he said.

[Updated at 12:26 pm: Enderle has done consulting work for Microsoft and other tech firms.]

Google, which had $23.7 billion in revenue last year, is facing vigorous competition from rival Internet upstarts such as Facebook Inc. and Twitter Inc. The report breaks down Google’s economic effect in all 50 states and includes profiles of small businesses. It was prepared by Google economist Hal Varian, who estimated the business generated by its search engine and ads linked to queries, the amount of money generated for online publishers through ads placed on sites and the money it gives away through its nonprofit arm, Google.org.

The company claims that businesses bring in $2 in revenue for every $1 they spend on AdWords, Google's online search advertising program. Businesses receive five clicks on their search results for every one click on their ads, it estimated. According to the calculation, businesses get $8 in profit for every $1 they spend on AdWords.

Google said the estimates were conservative.

-- Jessica Guynn 

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