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Jobs Watch: Google's economic engine

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Ben Jacklet
Wednesday, May 26, 2010

Google made a rare and very un-Google-like public appearance yesterday in Southeast Portland. It was interesting to see a company that has brilliantly reinvented so many things over the past decade playing the role of a typical business, hobnobbing with economic development officials, handing out free pens and notebooks and boasting about economic impact. Then again, $512 million worth of economic impact in Oregon is a phenomenon worth boasting about.

This is a company that started without a business plan or a revenue source. Co-founders Sergey Brin and Larry Page worked on the assumption that if they greatly improved people’s ability to find information, the money would follow. They were right. The advertising system that now funds the far-flung Google empire is a money-making machine, not only for Google but also for thousands of small businesses such as Clive Coffee, which hosted yesterday’s event.

Mark Hellweg of Portland created Clive Coffee to serve people who want to make great coffee at home. He launched in September 2008, just as the economy was about to fall off of a cliff. But even amid all of the mayhem his business has thrived, with help from Google. Google’s AdWords enabled him to target customers efficiently with relevant, unobtrusive advertising. Results provided by Google Analytics enabled him to improve his marketing as he went, testing his campaigns as he built them and replacing less productive phrases with catchy winners. It worked. Banks were dropping like flies, but people were racing to buy his $270 Dutch coffee makers at clivecoffee.com. 

Steady sales allowed Hellweg to travel to Costa Rica to find the perfect family-run coffee farm to supply his customers and to hire a specialty coffee roaster in Portland. He is launching a bike delivery service and plans to open a shop in Southeast Portland this fall. And his online business continues to hum along. One of every three dollars he earns comes directly through AdWords.

“AdWords is the fuel that caused my business to grow,” he says.

Clive Coffee is one of 28,500 businesses in Oregon that use Google’s advertising platform to sell their products. Those businesses pull in about $510 million a year through Google-enabled online sales. Add another $1.3 million in free advertising for 80 Oregon nonprofits and you get a $512 million economic benefit statewide. On one hand, that’s just a fraction of the company’s $54 billion impact nationally. On the other, it’s $512 million going into the pockets of Oregon entrepreneurs, with a 100 percent return on investment, if we are to believe Google's calculations.

“For every dollar that our advertisers spend, they receive $2 back,” says Alan Moss, Google’s director of online sales. “That’s a pretty good ROI.”

Indeed it is. Google’s three-line “sponsored link” text ads are brilliant in their simplicity. The price is set at auction, the rankings are based on relevance, and the advertiser only pays Google when someone clicks on the ad.

There are a lot of questions Google didn’t answer in yesterday’s event, particularly involving the company’s top-secret, electricity-gobbling server farm in The Dalles. But it is extremely difficult to fault the numbers Google did provide, along with the convincing story of economic opportunity that these numbers tell.

Ben Jacklet is managing editor of Oregon Business.

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