The impact of Internet technologies: Search
Some 70percent of clicks following a search in the United States take users to a landing page that is
less than a year old.
Thepercentage is similarly high elsewhere (India, 75percent; France, 55percent;
Germany, 49percent; Brazil, 40percent).
This source of value is similar to better matching in that it helps users find the information they need, but
here the focus is on finding products at lower prices. This report looks primarily at pricing comparison Web
sites to evaluate this source of value.
More than 40percent of Internet users in the United States, Germany, and France visited a price
comparison Web site in 2010, and in the United States, their numbers are growing at around 20percent
Such a degree of search-enabled price transparency inevitably reduces prices in some product
categories. One study showed that a 1percent increase in traffic to a leading price comparison Web site
decreased price dispersion—that is, the difference between the average and minimum price for a particular
This source of value benefits consumers in the form of economic surplus, often at the expense of retailers
and other vendors. However, price transparency may also reduce consumer uncertainty about making
a purchase, reassuring consumers they are getting the best price. It could thus potentially increase total
Long-tail offerings are sales of niche items that relatively few customers might want. However, the
aggregate demand in the long tail—that is, across a great many niches—can account for significant sales
volumes. This is certainly the case for the top online stores, which hold 6 to 23 times the number of items in
their online inventories that a physical store has in order to cater to long-tail demand.
These inventories are
so extensive that use of a search is often the only way for customers to find the items they want.
Search is commonly used for finding or selling older, long-tail media content. It enables consumers to find
the book, magazine, article, film, or recording they want, and it enables content providers to monetize old
content, the costs of which are already sunk.
The following examples illustrate the value search creates through long-tail offerings:
Web sites with broad long-tail inventories, such as Amazon and eBay, get 20percent of their traffic from
natural search. In addition, niche sites whose inventories are all in the long tail get more than 25percent
of their traffic this way.
An online research firm showed that search engines were used regularly by 32percent of US online
video viewers, many of whom seek long-tail content. Word of mouth was the only “search method” used
more regularly to find content.
51 Google data as of January 1, 2011.
52 ComScore data.
53 Zhulei Tang, Michael D. Smith, and Alan Montgomery, “The impact of shopbot use on prices and price
dispersion: Evidence from online book retailing,” International Journal of Industrial Organization, November 2010,
Volume28, Number6, pp.579–590. For additional examples, see Erik Brynjolfsson and Michael D. Smith,
“Frictionless commerce? Acomparison of Internet and conventional retailers,” Management Science, April
54 Fenner, Trevor, Mark Levene, and George Loizou, Predicting the long tail of book sales: Unearthing the power-
law exponent, Department of Computer Science and Information Systems, University of London, 2006,
Erik Brynjolfsson, Yu (Jeffrey) Hu, and Michael D. Smith, The longer tail: The changing shape of Amazon’s sales
distribution curve, September 20, 2010,
55 McKinsey US clickstream data, 2009.
56 Knowledge Networks press release, “Verbal word of mouth is pivotal source for learning about, deciding to
watch video—on TV or online; trumps social media as inﬂuence,” November 19, 2009.
Even when it comes to mainstream content categories such as news, people rely increasingly on
search. A 2010 survey of 3,000 US adults showed that more than 40percent of 18- to 64-year-olds
used search engines to find news online more than three times a week—20percent more than in 2008.
Often, the search leads to long-tail news content.
There are also important “second order” effects. For example, search makes it profitable for Amazon to
stock obscure books and for authors to write them in the first place.
This source of value again entails the matching of information, but this time to help online users discover
each other, be it for social or employment purposes. Examples include:
BeThe1, an online recruitment agency specializing in the luxury and fashion businesses and operating
in 30 countries. The success of this French company, which has enjoyed double-digit growth since its
launch in 2001, depends upon a proprietary search engine that helps it match candidates against very
Shaadi.com, an Indian matchmaking site with some 11million subscribers and estimated annual
revenue of $35million.
Exhibits 6 and 7 describe both these businesses in more detail.
Search tools can facilitate all sorts of problem solving, be it mundane matters such as how to put together
a chair or decidedly more important ones such as whether the plant your one-year-old has just swallowed
is poisonous. In business, search is commonly the starting point for solving a problem by bringing together
the right teams and content.
It is hard to measure the value of problem solving. Search reduces the time and cost of looking for
information while solving a problem. But because search makes so much more information accessible
quickly and efficiently, it also delivers a step-change increase in capability.
A multinational company wanting, say, to assess the feasibility of producing a complex new product can
use search to quickly gather together the right experts and the right data—a process that previously might
have taken many weeks and still might not have identified the optimal people and information. Today, it is
possible to assess an entire portfolio of products—and arguably make a better assessment—in the time it
might have taken to assess just one product without search.
Despite the difficulty of measuring the impact of search, we believe the value of problem solving could
outstrip that of many other sources of search value and is worthy of more, dedicated research. Adam Smith
noted that specialization (and thus productivity) is limited by the extent of the market, and search increases
that extent. Here are some examples that illustrate its worth:
More than 95percent of pharmaceutical industry companies use internal search engines to facilitate
problem solving across geographies.
Ninety-fivepercent of US journalists use search engines to research a story.
57 Pew Research Center for the People and the Press, Ideological news sources: Who watches and why,
conducted by Princeton Survey Research Associates International, September 12, 2010.
58 Erik Brynjolfsson, Yu (Jeffrey) Hu, and Michael D. Smith, “From niches to riches: Anatomy of the long tail,”
Sloan Management Review, Summer 2006, Volume47, Number4, pp. 67–71.
59 2010 PRWeek/PR Newswire media survey, PRWeek and PR Newswire, April 2010; 1,300 US media
professionals and 1,385 US PR practitioners were surveyed online January 4–19, 2010, by C. A. Walker.
The impact of Internet technologies: Search
Founded in 2001; a recruiting agency specializing in the
luxury and fashion businesses
Recruits for positions across all functions (e.g., HR,
sales, marketing, retail) in 30 countries across the
United States, Europe, Middle East, and Asia
Has one of the largest databases with more than
120,000 people registered in over 140 countries
Developed an algorithm using search engines to
preselect candidate profiles matching several criteria
Has had double-digit growth since it was created and is
No. 1 in France in its field with more than 30
recruitments per month
~5 times as productive as competitors, employs 14
employees, and has a 90% rate of success against
industry average of 10–15%
Search allows BeThe1 to reach 75% of relevant
candidates for very specific jobs vs. 10% for its
BeThe1 uses search to effectively recruit personnel in the
SOURCE: Interview with BeThe1 CEO François Bouyer; McKinsey analysis
BeThe1 (France) is an online recruitment site
whose success stems from a proprietary
Web search that scouts for suitable profiles,
saving time and offering better matching in
the recruitment process.
Founded in 1996; a popular
Indian matrimonial site
Objective: “to provide a
experience by expanding
the opportunities available to
meet potential life partners”
Uses search to help match
millions of users to each
other for matrimonial
Over 11 million subscribers,
mobile and nonmobile
Shaadi.com uses search to provide matrimonial matches
SOURCE: Company Web site; EmPower Research; press search; McKinsey analysis
Shaadi.com relies on search
to provide value to customers
by increasing the pool
of marital candidates they
can choose from.
New business models
Without search, many recently developed companies and business models would not exist. Price
comparison sites are a case in point. Examples of new companies and business models that are thriving on
the back of search technology include:
Kayak.com, a US online travel site that aggregates results from hundreds of travel sites to help users
find the cheapest flights available. In December 2010, it had 4.3million unique US visitors and 47million
Justdial, referenced earlier in this report, is a search service in India for those without Internet access or
who perhaps cannot read. Callers, regardless of their language, can ask an operator to search on their
behalf. The business model is a variation of paid search. When a caller accesses a sponsored search
result, the advertiser pays Justdial a fee, much like the cost-per-click model in advertising. Its 2009–10
revenue was 1.34billion rupees ($29million)—an average of 7 rupees ($0.15) per customer.
Exhibits 8 and 9 describe these businesses in more detail.
Given the quantity of digital music and video available, entertainment is a rich driver of search value. For a
generation of teenagers who prefer to watch videos on YouTube rather than television, search has enabled
a new form of entertainment. Its entertainment value will only increase as the Internet becomes the primary
digital infrastructure for video programming of all kinds, effectively turning our televisions into network
The essential role search plays in entertainment is illustrated by the following statistics:
of total queries on Web search engines are for such topics as entertainment, adult content,
games, or sports.
21percent of YouTube streaming video traffic arrives via search.
There were 40billion searches in 2009 on YouTube’s site in the United States, representing around
20percent of all US searches for YouTube content.
The other 80percent came from other search
20percent of MTV’s streaming media (e.g., video) traffic arrives via search.
7percent of Vevo’s streaming music traffic comes via search. Vevo is the leading subscription music
service in the world.
We do not claim that this list of the sources of search value is exhaustive, but it does capture a wide
variety of ways in which search can affect various constituencies. As search evolves and the superset of
searchable content continues to expand, we anticipate that new and unexpected sources of value will
emerge. In the next section, we examine in more detail how these nine sources of search value affect
60 ComScore data.
61 ComScore data.
62 McKinsey analysis based on ComScore data.
63 ComScore data.
64 ComScore data.
The impact of Internet technologies: Search
Founded in 2004; an
online travel search
engine that aggregates
results from hundreds
of travel sites
Consumers can see
thousands of results
and sort by price,
allowing them to find
the cheapest tickets
PPC ads and referrals for
Kayak.com uses search to help consumers match tickets
at the lowest fare levels
SOURCE: Compete; kayak.com; Internet research; NeXtUp!; press search; McKinsey analysis
Kayak.com has successfully
used search to aggregate
results for ticket prices,
building a strong business
that makes booking tickets
easy and price transparent.
Indian local search destination
started in 1996
Customers dial a phone number
and a live representative
provides search results
Search also available through
SMS and Web
Over 25 million
Over 200 million
searches in a year
Covers more than
200 cities in India
Search referrals and ad-based model
JustDial provides voice-enabled local search in India
SOURCE: justdial.com; press search; McKinsey analysis
Just Dial provides
search by leveraging
phone operators to
overcome access and
Search affects the activities ofmillions of people and organizations, so we cast our research net wide
when trying to assess its value. We looked at its impact on businesses, individuals, and public service
entities, homing in on 11 constituencies within these main groups—for example, advertisers and retailers
in business, and health care and education in public services. We then examined the relevance of the nine
sources of value to each in monetary and nonmonetary terms.
The results should be regarded as case studies illustrating the value of search rather than as a fully
exhaustive analysis. If the task of quantification was too uncertain for some sources of value—such
as calculating the value of better matching for retailers—or if the value was likely to be minor, it was not
included in our analysis.
An analysis of value by constituency
The study showed that value accrues to all constituencies. The three most-studied sources of value from
search—time saved, raised awareness, and price transparency—are important. Our study illustrated the
additional impact of the other six sources of value we identified and revealed the extent to which the value of
search goes underestimated. Exhibit10 shows the sources of value for each constituency.
Primary sources of value from search
SOURCE: McKinsey analysis
Individual content creators
Individual information seekers
New business models
Sources of value
The value of search:
Who benefits and how?
The impact of Internet technologies: Search
The following section describes in more detail how value accrues to each of the constituencies. Where
possible, we quantify a particular source of value. When that is not possible, we illustrate its impact
Having grown rapidly in the past fiveyears, online advertising now accounts for a significant portion of total
advertising spend, namely 18percent in the United States, 20percent in Germany, 16percent in France,
16percent in Brazil, and 3percent in India
(Exhibit11). Of that online spend, advertisers allocated around
40percent to search advertising, thus spending about 6percent of their total advertising outlay on online
search advertising globally.
What are the sources of value that motivate advertisers to spend so much on search? First, search and
search advertising raise awareness. Search is an influential channel when consumers are deciding
whether to make a purchase and what to buy. For example, McKinsey research shows that search
engines dominate the touch points in the awareness and consideration phases of the purchasing process,
particularly for automobiles, consumer electronics, and travel.
Other research, this time in the personal
computer industry, shows that when customers are evaluating products, Web searches are the most
influential touch point, even higher than in-store touch points such as meeting with a sales representative.
Second, search has proven to be an extremely effective means of matching relevant information with user
needs, helping advertisers target the right audience. Someone who searches for “auto insurance,” for
example, is likely to be interested in purchasing insurance, and an appropriate advertisement in the search
results is likely to attract interest.
Third, search helps consumers find long-tail, niche products that they would otherwise be unlikely to
65 MAGNAGLOBAL, Global Forecast Model, 2010.
66 MAGNAGLOBAL, Global Forecast Model, 2010.
67 McKinsey Digital Marketing Survey, 2007.
68 McKinsey Customer Decision Journey Survey for Consumer Electronics, February 2009.
Online advertising spend across countries by type, 2004–10
Online spend as a
percentage of total
ad spend, 2010
CAGR, 2004–10 (%)
Online spend, all types
1 2004 data for search in India were not available, so 2006 was used.
2 Germany 2004 paid search data not available, so Magna Global number was used; classifieds were calculated by using
Source Digest nondisplay, MAGNAGLOBAL paid search.
3 US ratio of classifieds ÷ (paid search + classifieds) was used to split paid search from MAGNAGLOBAL into paid search and
classifieds for India and Brazil.
%; USD millions
SOURCE: Source Digest; MAGNAGLOBAL; McKinsey analysis
Paid search spend
All of these sources of value are particularly important to smaller companies, which, at relatively low cost,
can reach a big audience. This is reflected in the fact that many more companies use search advertising
than they do offline advertising formats. In the United States, paid search is used by about ten times as
many advertisers as any other media channel (online display is second).
We quantified the value of search to advertisers
from the three sources already described by estimating
the ROI they earn from paid search advertising (both online and mobile), SEO, and online classified
advertising. By looking at the effectiveness of search advertising, we estimated advertisers earn an average
ROI of 7:1, given the typical mix of types of search-related advertising (see methodology for details). Based
on these calculations, we estimated that the value advertisers derived from search in 2010 was $121billion
in the United States, $13billion in Germany, $10billion in France, $5billion in Brazil, and $1billion in India.
Search benefits retailers through raised consumer awareness of their online and offline stores and
products; better matching of products to customer needs; and the ability to better sell long-tail items. In the
process, new retail business models have emerged, such as online retailers dedicated to sales of long-tail
items, and smaller retailers have discovered a more level playing field: as the size of the retailer decreases,
the relative benefit gained from search increases. For retailers that compete on the basis of price, price
transparency is also a source of value. For others, however, it can result in surplus accruing to consumers.
E-commerce has experienced double-digit growth over the past threeyears, and search has played a
critical role in that growth. E-commerce was worth $252billion in the United States in 2009, representing
7percent of total retail spending there. In Germany, e-commerce totaled $46billion (10percent of retail
spending); France, $35billion (7percent); Brazil, $8billion (2percent); and India, $4billion (3percent). In the
five countries studied, anywhere between 30 and 70percent of the population shopped online (Exhibit12).
69 TNS; Media Dynamics, 2008.
70 When calculating the value, we deﬁned advertisers as organizations that use paid search advertising as well as
those that beneﬁt from natural search.
SOURCE: Forrester; Fevad; BVH; PhoCusWright; Euromonitor; ComScore; survey performed by TNS Sofres/Consumer
barometer in France, Germany, and India; ACTAconsumer survey; e-Marketer; e-bit WebShoppers; McKinsey
E-commerce, ROPO1 ratio, and e-consumers across countries, 2009
% of total retail
% of online population
1 ROPO = Research Online–Purchase Offline.
The impact of Internet technologies: Search
Search plays a bigger role in enabling retail sales than the e-commerce figures alone suggest. That is
because search enables what is known as Research Online-Purchase Offline (ROPO): consumers collect
information on the Web that informs their purchasing decision, and then they go to a physical store to
buy what they have chosen. The estimated ratio of ROPO purchases to online purchases in the countries
studied ranged between 0.9 and 1.5. In other words, the value of goods researched online and purchased
offline is similar to that of goods researched and purchased online.
We estimated the value of search to retailers
by looking at the volumes of sales that occur because search
was used at some stage in the decision-making process. This volume was calculated by synthesizing the
results of three separate analyses. (See methodology for details.)
Accordingly, the value of search for retailers was worth 2percent of total retail volumes in the developed
economies studied in 2009 and 1percent in the developing ones where e-commerce is less prevalent.
This represents 10 to 15percent of the value of e-commerce and ROPO sales combined and translates
into search value for retailers ranging from $1billion in India to well over $50billion in the United States
It should be noted that these figures represent net value. They do not include costs or the impact of price
transparency on retail revenue.
71 We deﬁne retailers for the purpose of this calculation as businesses with a presence on the Web that sell
products and/or services to consumers either online or ofﬂine.
Impact of search on e-commerce and ROPO, 2009
SOURCE: Hal Varian, “Online ad auctions,” May 2009; McKinsey primary research, Digital Marketing Survey, 2007; comScore;
Nielsen; McKinsey analysis
% of retail
Entrepreneurs are heavy users of search tools and benefit from them in various ways throughout the
start-up life cycle. It helps them problem solve when testing new business ideas; find suppliers, investors,
and customers; and identify key talent—the latter an important challenge for small companies whose
every employee can be crucial to success. A Canadian survey found that 96percent of entrepreneurs
used search for general research and that 77percent used it for competitive intelligence.
Israeli survey of entrepreneurs found that search engines were the most heavily used tools for information
Perhaps most important, search has fostered new, entrepreneurial business models. So-called micro-
multinationals are born global as search gives them instant access to a worldwide audience of potential
customers. Niche-market players also depend upon search to find the suppliers and customers they need.
Shoes of Prey is an Australian shoe manufacturer whose customers are invited to design their own shoes.
Without search, this company would have found it difficult to find a critical mass of such customers. But
a paid search campaign that gave it access to an international market means that some 40percent of its
sales are now to overseas customers.
Some companies have been born on the back of a particular source of search value. India’s Shaadi.com
and France’s BeThe1 recruitment site are the product of people matching. Others use long-tail business
models. QueBarato, for example, is a Brazilian classifieds Web site operating in Latin America and the
United States. It has more than 4.8million listings a day generated by individuals and small business for jobs
and events and for real estate, vehicles, and many other products.
Given the many ways in which search creates value for entrepreneurs, it is difficult to quantify and we have
not attempted to do so. However, the previous examples illustrate the scope of the benefits.
Content creators derive value from search in a variety of ways. Many profit from their retail activities, so
some of the sources of value that apply to retailers apply to these businesses, too. With so much online
content available, search enables better matching of consumer demand to content supply; it raises
awareness of mainstream content creators and directs traffic to them; and it makes more obscure, long-
tail content discoverable. As advertisers, content creators also benefit from the sources of value that other
advertisers enjoy: raised awareness, better matching, access to the long tail, and new business models.
We quantified two sources of search value for content creators: revenue from search-related advertising
(on horizontal Web search engines and internal searches within Web sites) and revenue from content
—that is, sales of books, music, and videos through e-commerce and as a result of ROPO. (See the
methodology for more detail.)
Exhibits 14 and 15 show the value accrued by content creators from each of these revenue streams. In the
United States, the value from advertising is well over $2.2billion; in India, it’s more than $20million. The
value from content sales is more than $300million in the United States, representing up to 1percent of US
content sales. In India, the value from content sales is $25million, representing 4percent of Indian content
72 Business Development Bank of Canada, ViewPoints online panel: Ad hoc study among Canadian entrepreneurs,
73 Snunith Shoham, Shifra Baruchson-Arbib, and Osnat Gouri-Oren, “An exploratory study of Israeli start-up
entrepreneur usage of the Internet,” Journal of Information Science, Volume32, Number1, February 2006,
74 We did not attempt to quantify the value of business-to-business content creators or media companies that
sell on a subscription basis, although we acknowledge this is a source of signiﬁcant value.
Documents you may be interested
Documents you may be interested