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Friday, December 7, 2007

Economics of the Internet: Supply vs. Search

A UK company Hitwise was able to increase market share in the Wii market entirely through Search Engine Optimization. Only 1% of their traffic is attributed to Paid Search.

With respect to the traditional supply and demand model the search statistics may be a proxy metric for quantity demanded, and an accurate demand predictor variable... more predictive with certain products and services than others. How might search engine companies like Google use search data to forecast short and long term economic trends? Do you think companies like Cisco and Intel are currently incorporating search data into their global macroeconomic models to drive R&D strategy?

There's a large potential market for the engines to sell the search data for these purposes. Take a look at the results comparing 3 real estate markets on Google Trends, a search trend tool introduced to the blog earlier this year. If search has a direct relation to market demand, would this indicate that housing prices will drop less in Miami than the other two markets? Have you encountered any news on the use of search data for business forecasting, or Search Engines plans to make the underlying search data available accessible, or to what extent US and international privacy laws prohibit this data sharing/selling even at the aggregate/non-identifiable level?

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