65
10
entrepreneurs, doctors, educators, and journalists, search has become indispensible. A survey of biology
teachers in the United States, for example, found that 90percent used search engines to find presentation
materials such as photos, audio, and other curriculum content and that 80percent used them to plan daily
lessons.
34
The use of search outside of work also continues to grow, though less quickly, and is the starting point for
many Web activities. For example, 82percent of US Internet users start with a search engine when they
look for public information or complete a transaction with a governmental entity, while 80percent use a
search engine as a starting point for health queries.
35
All of this search activity takes place in a world where only around 30percent of the population has Internet
access
36
—though lack of access is not always an impediment to be able to search. Justdial is an Indian
company that enables users to phone and ask an operator to conduct a search on their behalf, overcoming
access as well as literacy problems. Justdial receives some 250,000 phone calls and conducts more than
210,000 Web searches each day.
In retrospect, it was inevitable that search would become so powerful, given the forces at work. First, the
power of Moore’s and Metcalfe’s laws
37
meant it became easy and cheap to capture, digitize, and store
information. Second, the explosive growth of the Internet in terms of reach and usage generated still more
users and content. And third, the efficiency of online transactions and the exchange of information and
content lured commerce and business onto the Internet.
As a result of these forces, users needed a mechanism for finding and discovering information on the
Internet. Early attempts to impose some order on it all mimicked the physical world in the form of online
directories and catalogs, though these were soon overwhelmed by the scale and dynamism of online
information. And so online search was born. (See Box 2, “A history of search.”) Users could now find what
they wanted, while providers of information, products, and services—be they individuals or organizations—
could locate the right audience at negligible cost.
But users’ online behavior has since added another dimension to its utility. When people search online,
they are signaling information about themselves: what they are looking for, when they are looking, and in
what context—for example, the Web page they visited before and after the search. Such information can
be harnessed by those seeking to deliver more relevant content or advertising, often a source of value to
providers and searchers alike. This dimension also raises concerns about privacy. Some research has
been conducted into the value users put on their privacy—that is, how much they might pay to protect their
online information.
38
(Given that privacy issues are extensively discussed elsewhere, they are not the focus
of this report.)
How should one think about the value of all this search activity? Most often, it is considered in terms of its
value to the search industry—that is, enterprise search, classified and local search, and search marketing.
Together, these three segments earned estimated revenue in 2010 of some $20billion in the United States
and $40billion worldwide.
39
(See Box 3, “The money in the search industry.”) A very rough estimate of
their profit margins
40
would indicate profits of about $8billion for US search companies. Divide this by the
34 Anne Marie Perrault, An exploratory study of biology teachers’ online information-seeking practices, American
Association of School Librarians, 2009.
35 Pew Internet and American Life Project, 2010.
36 International Telecommunication Union data on Internet usage, http://www.itu.int/ITU-D/ict/statistics/;
population data from the World Bank, http://data.worldbank.org/data-catalog.
37 Moore’s Law states that the number of transistors that can be placed on an integrated circuit doubles
approximately every twoyears. Metcalfe’s Law states that the value of a telecommunications network is
proportional to the square of the number of connected nodes in the system.
38 McKinsey & Company for IAB Europe, Consumers driving the digital uptake: The economic value of online
advertising-based services for consumers, September 2010.
39 McKinsey analysis based on MAGNAGLOBAL, Global ad spend by channel, including mobile, 2000–2016,
December 2010.
40 Typically, Internet search engines and classified search generate profit margins in the range of 20 to
40percent, and SEO companies generate 10 to 20percent profit margins (based on McKinsey analysis of
returns from public companies in 2008).
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38
11
The impact of Internet technologies: Search
number of search queries in the United States that same year (about 270billion), and the profit per query is
worth about three cents to these companies.
Yet this comes nowhere near to capturing a sense of the real worth of search if you consider even for a
moment the very different ways in which individuals and organizations use search and why they value
its utility. Much more value is created in the “search value chain” and captured by many more market
participants. Hence the need for a more thorough assessment of the value of search, which this report aims
to help meet.
Box 1. Search scope
Search is defined broadly. It includes any online search activity using general, horizontal Web search
engines, such as Google and Yahoo!, and specialized, vertical ones, such as Amazon or YouTube.
It also includes consumer searches and those conducted by people in businesses. It covers
searches of all types of media, including text, images, and video, and through any type of device,
including personal computers and mobile devices such as smartphones. Currently, about a third of
all searches are done at work, while the daily number of vertical searches conducted in the United
States already exceeds the daily number of searches performed on any single, major, horizontal Web
search engine such as Google or Bing.
1
Thus the need to define search broadly. However, we do not
include in our estimates of search the impact of pure recommendations from other users or simple
browsing (i.e., following links not generated by entering search terms) through a Web site.
Most analysis of the value of search has concentrated on the US market. This report includes four
more countries—Brazil, France, Germany, and India—to give a view of how search might vary
depending on geography and economic circumstances. The United States, Germany, and France
can be considered leading-edge countries in terms of Internet accessibility and usage. India and
Brazil are examples of up-and-coming economic powers where a relatively small segment of the
population is currently active online. Adding search activity in Brazil, France, Germany, and India to
that in the United States more than doubles the sample size of searches.
The report also includes mobile phone searches and those conducted on other mobile devices such
as tablets.
Finally, we have assessed the value of search for a relatively large set of constituencies, including
individuals and organizations, and examined a wide range of sources of value. Much previous
research has focused on providers of search services, particularly advertisers. Yet our analysis
suggests that search advertising accounts for less than 40percent of the total value derived from
search.
The research was conducted in the first quarter of 2011.
1 ComScore qSearch.
49
12
Box 2. A history of search
Search had its conceptual beginnings in the 19th century, when pioneers such as Belgian Paul Otlet
pondered how to collect and organize the world’s knowledge. In 1895, Otlet began a classification system
using index cards, a system that was to become ubiquitous in libraries around the world. He hired a staff
whose job was to read books, write the facts on the index cards, and cross-reference them. The filing
cabinets in his warehouse were stuffed with more than 15million index cards before many were destroyed
in World War II, but he had a grander vision still that presaged today’s search capabilities. He sketched
out plans for a system in which people would be able to search throughmillions of interlinked documents
and images from a great distance through what he envisaged as “electric telescopes.” He described
how people would use the devices to send messages to one another, share files, and even contribute to
social networks—able to “participate, applaud, give ovations, and sing in the chorus.” He called the whole
thing a “réseau,” or network, whereby “anyone in his armchair would be able to contemplate the whole of
creation.”
1
Fast forward to 1969 and ARPANET, the network sponsored by the US military’s Defense Advanced
Research Projects Agency for computers to communicate with each other, and the core of what became
the global Internet. Over time, the nodes on the network became thousands of large computers. And as
other, similar data networks emerged around the world, and as they were hooked up to a much larger,
collective Internet, it became increasingly difficult for people to find information.
The problem got worse when the Internet went mainstream with the development of the “World Wide Web”
in the early 1990s. Before then, the Internet was mainly the province of scientists and researchers who did
not regard it as a mass medium. It made the transition when a set of standards was created and a new class
of easy-to-use applications called “Web browsers” was developed. These included the ability to easily
display images as well as text and to follow links between pieces of content.
To cope with the subsequent proliferation of content, many hierarchical directories of information were
developed, such as Yahoo!, which debuted in 1995, in which information was maintained and edited
manually. Computer scientists soon began to develop automated ways to locate specific information on the
Web—the needle in a haystack of hundreds of thousands of institutional computers, and tens ofmillions of
smaller servers and personal computers that had become part of this fast-growing network. Search tools
became a necessity for such an enormous network to be usable.
Most algorithmic search engines work more or less the same way: they employ software robots that
“crawl” through the text of Web pages and index where particular words or groups of words show up. Many
engines based on this technology, including WebCrawler, Lycos, AltaVista, and Excite, emerged in the
mid-1990s, often combined with directories. In addition, online companies such as Amazon and eBay built
internal product search algorithms that focused on their own universe of items, sellers, and customers.
Google’s search engine had its origins in 1996, as a graduate student project at Stanford University. What
made it different from other Web-indexing engines was that it also analyzed how many other Web pages
linked directly to a page that included the search terms. The idea behind this analysis, dubbed PageRank,
2
is that the more a page is linked to by other pages, the more relevant other users find it. Thus, search
engines aggregate and leverage the collective votes of millions of web page creators each time they provide
a link to a particular page as a source of information on a particular topic. Consequently, it ranks higher in
the search results.
1 Alex Wright, “The Web time forgot,” New York Times, June 17, 2008,
http://www.nytimes.com/2008/06/17/health/17iht-17mund.13760031.html
2 Sergey Brin and Lawrence Page, The anatomy of a large-scale hypertextual Web search engine, Proceedings
of the Seventh International Conference on World Wide Web (WWW), Brisbane, Australia, 1998, pp.107–117,
http://dbpubs.stanford.edu:8090/pub/1998-8.
73
13
The impact of Internet technologies: Search
Box 2. A history of search (continued)
The term “social search” began to emerge around 2004. Results from a social search give more visibility
to content created or touched by other people, especially those in a user’s network, perhaps because
it has been bookmarked or tagged, for example. This means it is likely to be more relevant to the user.
Services such as del.icio.us and Reddit aggregate the “social bookmarks” from large numbers of people
to suggest content. Users are increasingly navigating to Web sites from links on social networks, a role that
search engines had traditionally dominated (see Exhibit5). Algorithmic search engines are now starting
to incorporate social cues—for example, information about content that users have tagged—into their
relevance-ranking algorithms.
Exhibit5
8
12
26
31
22
37
13
40
69
10
9
21
24
19
29
20
33
65
14
8
19
22
22
28
33
34
66
Search
engines
Links from
friends via
e-mail
Other1
Portal
Web sites
Directly
enter
address
Your home
page
Book-
marks/
favorites
Social
networks
Search
toolbars
SOURCE: McKinsey iConsumer surveys 2008–2010, US 13- to 64-year-old Internet users
Social networks increasingly playing navigation role
that search engines have traditionally dominated
1 Other includes widgets on personal home page, social bookmarking tools, RSS feeds, and other.
Which of the following features/Web sites do you use to get to the content
that you read/browse online? (Select up to 3)
% of respondents
2010
2009
2008
-15
+20
-24
-27
63
14
Box 3. The money in the search industry
The search industry comprises three main segments: enterprise search, classified and local search,
and search marketing. Together they earned revenue of $40billion worldwide in 2010.
Enterprise search
Companies that rely heavily on knowledge workers often invest in their own enterprise search
capabilities to enhance the productivity and competitiveness of their staff. Others use third-party
providers such as Endeca, Autonomy, Microsoft, and Exalead. In the United States, the third-party
enterprise information management market was estimated to be worth $1.2billion by 2010.
1
The
global third-party enterprise search market is estimated to be worth $2.8billion.
Classified and local search
This segment includes those that provide search capabilities for sites that classify content into
particular categories, such as yellow and white page directories that have moved online, and
recruiting and travel Web sites. Online searches have become by far the most common way of
consulting directories, and online classified advertisements account for 80percent of total listings.
The online classified market was worth about $2.6billion in the United States in 2010,
2
in a global
market worth approximately $8billion. The United States accounted for 65percent of revenue in this
segment of the five countries analyzed.
Fixed-price placement of advertising in the classified database is still the largest source of revenue for
participants in this segment, though it is losing ground to a model in which advertisers pay per click
on their ad and/or bid for a certain key word. About 20percent of revenue originated from the latter
revenue model in the United States in 2008.
3
By 2010, the proportion had reached 40percent.
Search marketing
This segment includes search engine providers that earn advertising revenue and companies that
provide search engine optimization (SEO) services. It is by far the largest segment of the three,
accounting for about 70percent of total revenue.
In most advanced Internet markets such as North America and the United Kingdom, almost
80percent of companies market their products and services online.
4
They allocate a significant
portion of their online marketing budget either to paid searches, in which they pay to have their sites
appear in a prominent place on the search results page, or SEO, which helps them figure out which
key words will get them higher on a search list after what is known as a “natural” key word search.
Revenue from key word search spending has been growing at 20percent a year globally,
5
to become
the largest form of online advertising spending—close to 50percent in Europe.
6
The market for paid searches and SEO was estimated at $15billion in the United States and
$30billion worldwide in 2010.
7
US revenue accounted for some 80percent of total revenue in this
segment in the five countries analyzed.
1 Institute for Prospective Technological Studies, Economic trends in enterprise search solutions, European
Commission Joint Research Center,
http://ec.europa.eu/dgs/jrc/index.cfm?id=1410&obj_id=10930&dt_code=NWS&lang=en.
2 MAGNAGLOBAL, US media advertising revenue forecast, January 18, 2011; Screen Digest data on global
online classifieds and directories advertising revenue by country.
3 Borrell Associates.
4 Econsultancy, UK search engine marketing benchmark report, June 2010,
http://econsultancy.com/us/reports/uk-search-engine-marketing-benchmark-report.
5 Global ad spend by channel, including mobile, 2000–2016, MAGNAGLOBAL, December 2010.
6 Internet Advertising Board Europe, The online ad market continues to grow despite the recession,
http://www.iabeurope.eu/news/europe%27s-online-ad-market-continues-to-grow-despite-the-
recession.aspx.
7 Econsultancy in association with SEMPO, State of search engine marketing report 2010, 2010,
http://www.sempo.org/resource/resmgr/Docs/State-of-Search-Engine-Marke.pdf.
46
15
The impact of Internet technologies: Search
How does an online search create value? Most research to date has looked at and quantified only three
main sources of value: time saved by the searchers, money saved by consumers through greater price
transparency, and the return on investment (ROI) for advertisers.
A few studies have been conducted on the first of these, time saved. One study
41
found that a successful
search for academic information online took, on average, one-third of the time of a similar search in an
academic library, though this did not account for the time it might take someone to travel to a library. Other
studies describe how shoppers regard time saving as one of the major benefits of searching for products
online.
42
More research has examined the impact of search on product prices because of the increased
transparency it enables, and several studies have researched the value derived by advertisers for paid
searches—that is, paying to have their Web sites appear prominently in search results—looking at the value
derived from raised awareness as well as sales.
There are several additional ways in which search can create value, some of which can be measured in
financial terms, and others that cannot. In all, we identified nine sources of search value that together start
to reveal its true scale. Here we define each in turn and give examples that indicate the breadth of ways in
which each creates value.
Nine sources of value
Better matching
Search helps customers, individuals, and organizations find information, products, and services that are
relevant to their needs, and it helps those with something to offer locate the right audience or customers.
The value that search creates by pushing prices lower is considered separately.
Examples of value creation through better matching include:
In the United States, the National Suicide Prevention Lifeline reported a 9percent increase in legitimate
calls to its hotline after links were displayed in search results pages in response to searches that
included key words such as emergency, suicide, or poison.
In a study of 1,275 consumers in four retail categories—clothing and footwear, beauty and skin care,
DIY hardware, and kitchen and bathroom renovations—consumers who used the Internet to search for
product information prior to making a purchase in a physical store spent more money than those who
did not.
43
41 Yan Chen, Grace YoungJoo Jeon, and Yong-Mi Kim, A day without a search engine: An experimental study of
online and offline search, working paper, School of Information, University of Michigan, 2010,
http://yanchen.people.si.umich.edu/papers/VOS_20101115.pdf.
42 Andrew J. Rohm and Vanitha Swaminathan, “A typology of online shoppers based on shopping motivations,”
Journal of Business Research, July 2004, Volume57, Number7, pp.748–757. See also Pradeep Chintagunta,
Junhong Chu, and Javier Cebollada, Quantifying transaction costs in online/offline grocery channel choice,
Chicago Booth School of Business research paper 09-08, 2009.
43 Sean Sands, Carla Ferraro, and Sandra Luxton, “Does the online channel pay? A comparison of online
versus offline information search on physical store spend,” The International Review of Retail, Distribution and
Consumer Research, 2010, Volume20, Number4, pp.397–410.
How search unlocks value
52
16
Time saved
Search can make it quicker to find information, which in turn can make it quicker to make decisions and
shop. As a result, it boosts productivity. The following are examples that suggest just how much time
search can save:
A typical Internet search for academic information takes seven minutes. Relying on physical references
takes 22 minutes.
44
A consumer generally finds time to perform ten searches online but only two searches offline for each
purchase.
45
It takes the same amount of time to do three searches in an online business directory as it does to do
one in a physical directory.
46
Analysis for this report suggests that knowledge workers in business each save 30 to 45 hours per year as a
result of search.
Raised awareness
Search helps raise the profile of any brand, product, or service, and paid search is recognized as one of the
most effective forms of advertising. Large amounts of advertising spend are therefore being reallocated
from other media into paid search.
The benefit of paid search to advertisers tends to be inversely proportional to the size of the advertiser, as
it gives the smallest of entities the ability to raise awareness of their offerings to a worldwide audience—an
otherwise difficult proposition. But paid search advertising is not the only way in which search can raise
awareness. Organizations and individuals benefit from natural searches—that is, when their names pop up
in search results simply because of what was typed in the search field. The majority of advertisers still find
that more visits to their Web sites arrive via natural searches than paid ones.
47
Here are some additional facts and examples that illustrate the value search can create by raising
awareness:
Search is one of the most powerful influencers when a consumer is considering which brand or product
to purchase. For personal computers, search is the most commonly used source of information
(34percent of times) during the active evaluation phase of the consumer purchasing decision process.
48
Search accounts for 25percent of the traffic of mainstream content creators.
49
An analysis of some 400 small and medium-sized businesses in France showed that those that invested
in paid search advertising reported around twice as many cross-border sales as apercentage of total
revenue as those that did not. Over a three-year period, these businesses also reported annual growth
rates that were approximately one-and-a-half times as high as those that did not invest in search
advertising.
50
44 Yan Chen, Grace YoungJoo Jeon, and Yong-Mi Kim, A day without a search engine: An experimental study of
online and offline search, working paper, School of Information, University of Michigan, 2010,
http://yanchen.people.si.umich.edu/papers/VOS_20101115.pdf.
45 McKinsey analysis of comScore data, eBay annual report.
46 Yan Chen, Grace YoungJoo Jeon, and Yong-Mi Kim, A day without a search engine: An experimental study of
online and offline search, working paper, School of Information, University of Michigan, 2010,
http://yanchen.people.si.umich.edu/papers/VOS_20101115.pdf.
47 McKinsey US clickstream data, 2009.
48 McKinsey Customer Decision Journey Survey for Consumer Electronics, February 2009.
49 McKinsey US clickstream data, 2009.
50 McKinsey proprietary survey of French small and medium-sized businesses, 2010.
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