Graeme Philipson
August 4, 2016

Do free apps boost productivity?

Economy

Do free apps boost productivity?

Andrew Charlton: Running a ruler over the 'free' stuff Google is so good at

Google Australia has released a report quantifying the benefits to the economy of its many free apps. It reckons that “by connecting consumers and businesses and providing productivity tools, Google helped businesses earn $15.1 billion” in Australia in 2015.

Google says the advantages to consumers are almost as great, at $14.8 billion, and that there are further benefits to society as a whole that are “large but difficult to quantify.” Even if we take the quantified $29.9 billion, that’s a lot of money.

The benefits come in many forms, says the report. The average Australian saves 31 hours a week using Google search, 11 million Australians travel more efficiently using Google Maps, 50,000 businesses use Apps for Work to collaborate and store documents. You get the idea.

The report says the improvements to business productivity alone is “broadly equivalent in scale to half the annual output of the agriculture industry and double the size of the airline industry.” The report was researched by Australian consultancy AlphaBeta (not to be confused with Google’s parent Alphabet).

It’s worth looking at. It tries to quantify – and put a dollar value – on things like the time saved by Google Maps showing you a more efficient route. It works out at 13.5 hours less driving (for both drivers and passengers), 13 hours less spent on public transport, and 2.5 hours less walking).

These seem reasonable estimates (you can imagine the folks at AlphaBeta having lots of fun tweaking their spreadsheets), and when you put even a small dollar value of people’s time and multiply it out across 24 million people, you get big numbers.

The total savings to the Australian economy of Google Maps, says the report, is $4.3 billion, or about $180 per person per year. That means the model values our saved time at a very conservative $6 per hour.

There are lies, damned lies, and statistics, as various people are supposed to have said. Depending on how they are presented, most statistics can be used in many different ways. (I prefer the quote “He uses statistics like a drunk man uses a lamp post – for support rather than illumination.”)

The report is very heavy on statistics, which is fair enough, and certainly no criticism. Statistics are useful, but they need to be taken in context. The $30 billion or so that Google says its apps saved the Australian economy last year is a lot of money, but let us bear in mind that it represents just 1.4 per cent of Australia’s GDP. We sometimes forget that Australia has the 12th largest economy in the world.

It would be surprising if such a revolution in productivity did not have some effect on the economy. We do not dispute the numbers, but there are a few things we need to bear in mind when looking at them.

The first is that these are gross benefits, which as the report admits don’t calculate the incremental impact of the activity displaced. But the other side to that is that the report measures only Google apps, and there are many other apps that do similar things which we must assume also improve our productivity and help the economy.

Indeed, there are all sorts of productivity improvements, and have been for thousands of years. The wheel in prehistory and even the stirrup a couple of thousand years ago revolutionised the way things were done, and in the short 250 years since the invention pf the steam engine things have really moved along. It has become a truism that the pace of change is accelerating.

The issue of quantifying productivity improvements has become a real academic and economic minefield.

This latest report from Google Australia is but the latest to try and put some numbers on it all. I for one have no doubt that Google has vastly increased my productivity as a journalist, because I can find out the necessary facts to support my arguments so much more quickly. But what of the benefits to the economy, or society as a whole?

Look at how the report tries to measure the business benefits of Google. It attempts to define the ‘direct impact‘, such as the gross profits of advertisers from using Adwords or gross revenues received from Google by content creators using AdSense or YouTube.

It also looks at the ‘indirect impact’, or economic effects produced in the supply chain as a result of demand from the businesses directly impacted. An example of an indirect impact is businesses that provide services to businesses that generate profits by using AdWords.

Then there is the ‘induced impact’ – the “economic effects produced by consumer spending among those who work at businesses that generate profits by using Google and businesses that provide services to these businesses,” which you might say is drawing a rather long bow.

The fact is, it is very difficult to properly quantify the benefits of any technology or productivity tool.

This latest Google attempt to do so is well executed, but it also highlights the many difficulties in attempting such an exercise. It is replete with charts on the methodology it uses, and there is no sleight of hand, but it is simply an impossible task.

The methodology is consistent, the production of the report is excellent, and the document is well worth a read.

But at the end of the day, it is a marketing exercise intended to justify Google’s existence in an environment where its business practices (most particularly its taxation tricks) are under scrutiny as never before.

Google apps are not ‘free’. They cost money – the rivers of gold flowing to Google and Facebook and Apple and others all come from somewhere.

The whole world of media and information has been turned on its head, and there are plenty of losers as well as winners.

But then, the Luddites were fighting for the losers, and we know what happened to them. We cannot fight the sorts of changes that Google has wrought, and we just about all agree they are for the better.

But we are on shaky ground when we try to quantify them, and if we try to justify them we truly on the path down the slippery slope.

The short word ‘tax’ does not appear anywhere in the AlphaBeta report. I know this because I used a free and very efficient Google productivity tool to search the document.

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