Mumin Blog

Economy may be recovering, says Google

Search engines have access to tons of valuable information, treasure troves full of clues to human behavior and what their millions of search engine users are up to. That is why the big search engines have great power even beyond their new role as brokers of advertising spaces on the Internet.

Every day search engines analyze our behavior and collect data we generate, and which they then store in databases. I have often wondered what data they have exactly and what they’re using them for. I’ve also known that professionals from dozens of industries are working at Google, for example, but what does an economist at Google do other than helping the company’s management make better business decisions?

Well, a Google economist might just as well analyze the search engine’s database, look at what people have been searching for and from that information infer that the economy is recovering. That is what Google’s economist Hal Varian has done, as he told the Washington Post. Mr. Varian has observed that the search patterns for certain search terms have changed over the last weeks. For instance, the number of searches for unemployment benefits has gone down while the number of searches for real estate agents and homes for sale has gone up. This could be a sign of a healing housing market. Such patterns can be analyzed using Google Trends, although I believe Google’s internal tools are much more powerful than the version of Google Trends freely available to the public.

So, could data collected from search engine queries be used to forecast the future development of the economy? It may be possible, although it sounds like a dream of the future. Because the popular search engines (Google, Yahoo and Bing) are used by more than one billion users from all over the world — and the number of Internet users will even increase as developing countries are getting better infrastructures and more advanced technologies –, the data gained from search patterns are highly representative, if you can derive the right conclusions from them. Access to this vast amount of up-to-date information has quickly made Google et al. maybe the biggest market research companies in the world. Search patterns are even better than the knowledge gained from opinion polls in many cases considering that the answers given in such polls are usually biased, whereas when people use a search engine they do not think about the fact that their usage of the search engine is precisely documented and analyzed in the background.

I’m not saying that we should rely on search engines to predict where the economy is heading. Far from that; search engines should not hold too much power. But it is interesting what Internet technology and modern online services, such as search engines, can be used for and what conclusions can be drawn from our usage of Google & Co. I believe statisticians have a bright future ahead of them with the increasing amount of data collected in our interconnected, fast-paced world. People will become more transparent, whether you like it or not, so you will be well advised to understand how to use that development for your own good, instead of having it used against you.


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