Executive Summary
SECTION 1 - The Impact of Google During 2020
2020 was a difficult year. Given rapidly changing circumstances, having fast access to accurate information mattered more than ever. With meeting in person often impossible, we all increasingly turned to digital services to keep us connected, productive and entertained.
But in spite of the challenges, it was also a year when many other positive long term trends accelerated. For years, policy makers have worried about businesses lagging behind in their adoption of the latest digital technology and the associated impacts on productivity. In 2020, hundreds of thousands of businesses successfully experimented for the first time with remote working, online sales and cloud computing. Much of this is set to continue during the recovery supporting innovation and productivity throughout the 2020s.
Google was proud to play its part in helping people live and work in the ‘new normal’. Families kept healthy with workout videos on YouTube, or stayed on top of homework with Google Classroom. Small businesses kept their opening hours up to date on Google Maps, and found new customers for the first time with Google Ads. Businesses and public sector organisations stayed connected and operational with the help of Google Cloud. Throughout the year, Google helped support the UK.
- In 2020, Google’s core search and advertising tools helped support an estimated £55 billion in economic activity for over 700,000 businesses in the UK. In total, we estimate that Google supports over £60 billion in the UK economy.
- By helping businesses shift to online sales for the first time during 2020, Google helped support £17 billion in economic activity. That is the equivalent to the GDP supported by a city the size of Bristol.
- 280,000 businesses have started selling online for the first time as a result of the pandemic. 30% of businesses say that the proportion of customers that come from online search and search advertising has increased since the start of lockdown.
Helping Families in Everyday Life
Google’s services help families save time, stay connected and access new information and skills. In 2020, families turned to Google to learn new hobbies during lockdown, keep up to date with school work, and support their local shops and restaurants.
When we asked people why they used Google services, it was not because they were unaware of any alternatives or confused about how to change a default on their computer. Many of them had changed browser, search engine or email provider in the past when they found a better alternative. The overwhelming reason they chose to use Google services was because they found them simpler, faster and more powerful.
- Over half of Britons have used Google Search tokeep up to date with the latest Government advice on Covid-19. 15 million Brits have used Google Maps to find out if local shops or businesses are open. 10 million Brits have used YouTube to watch fitness videos.
- 60% of Google Search users say they chose it because they found it easier to use. 71% of Brits said that they found Google Search gave more relevant results than other search engines.
- Over 500,000 businesses said that Google Workspace had been essential to their ability to keep operating during Covid-19. 69% of businesses agree that without online tools it would not have been feasible for their employees to work remotely.
- By helping them find information faster and collaborate easier, Google Search and Google Workspace are saving British workers over six hundred million hours a year. 40% of British workers reckon their job would be difficult or impossible without access to a search engine.
- The median business in 2020 estimated that around 20% of their revenue is a result of online search results and search advertising. Much of this is global - we estimate that Google Search and Ads are supporting £6 billion in exports.
- Over half of those businesses (58%) that have started selling online for the first time as a result of the pandemic say that they are likely to continue doing so in future.
- The Android App Economy generates £2.8 billion in revenue for UK developers, supporting 240,000 jobs across the UK. At the same time, YouTube creates an estimated £1.4 billion for the UK economy, and supports over 30,000 jobs.
Helping Workers Get Things Done
In 2020, businesses increasingly turned to the cloud to adapt their business model, keep collaborating with colleagues and remain productive. 70% of businesses agreed that their business is likely to continue to make use of hybrid working after the pandemic ends.
The search engine is one of the most important productivity tools in the modern economy, while the cloud makes it easier for businesses to adopt and apply best in class technology. Many Workspace features remained free for all businesses and public sector users throughout the peak of the pandemic to ensure continued access at a time of unprecedented demand.
Helping Small Businesses Connect with Customers
Google is an economic multiplier. Services like Google Ads, Google Maps, YouTube and Google My Business have made it possible for businesses of all sizes to reach customers worldwide, radically lowering the cost of advertising. During the pandemic, the role of online sales has become more important, with an increasing number of shops moving to a hybrid model.
At the same time, platforms like the Google Play Store, Android and YouTube have made it easier for anyone to be a creator - and kept us entertained throughout 2020.
SECTION 2 - Building Back Better: How Britain can harness the power of technology in the 2020s
In the last year, the record breaking speed in vaccine development has shown how fast innovation can move - and now we need to capture the same speed for the recovery.
In the second half of this report, we undertook new research to explore the strengths and weaknesses of the UK tech industry, constructing a new tech competitiveness index and interviewing multiple experts from the worlds of politics, policy and the industry itself.
Working with Google, we suggest three clear priorities for how the UK can take advantage of the opportunities of the next decade to become a world leader in tech.
1. Increase UK competitiveness: Become the best place to start and grow a digital business
The UK is the clear European leader in the tech industry, but still lags behind the world leaders. To match the per capita rate of VC investment in the US, investment in the UK would have to increase by another 65%. Over the next decade the UK has a once in a generation opportunity to gain a reputation for innovation enabling regulation.
By acting nimbly and using its new independence, in the 2020s the UK can become a world leader in innovation friendly regulation, trade deals and standards.
The Government should:
- Introduce Innovation Impact Assessments to better measure the full impact of new and existing regulation. This could help ensure that future regulation takes account of the opportunity costs of slowing new innovations.
- Task the inward investment unit with benchmarking the UK's competitiveness in the tech industry. This could help monitor the UK’s relative competitiveness, and ensure that policy takes account of the global picture.
2. Become a Digital Global Leader: Unlock the power of data
From climate change to drug discovery, AI and data have the potential to make a significant contribution to many of our most pressing challenges.
In the coming decade, digital infrastructure will be important as physical infrastructure - but there is still a long way to go to digitise Britain. The Government should take more of a leadership role in setting clear standards and, where possible, opening up data.
The Government should:
- Create a British Research Cloud to democratise access to data, and support UK innovation. At the moment, access to advanced AI research, computing power and other resources needed to undertake cutting edge R&D is limited to the Golden Triangle and few private organisations.
- Ensure the new R&D roadmap is focused on long term innovation. The Government should ensure new R&D spending is focussed on areas of national importance, goes beyond the traditional focus on defence and health, and supports more social science as well as technical research.
3. Levelling Up Digital Skills
Lockdown has helped accelerate many important trends, from small businesses adopting cloud to the revolution in remote working. Doubling down on this has the real potential to accelerate UK growth: on conservative estimates, remote working could increase UK productivity by £9 billion in the future.
However, while the majority of businesses now have their own website and use video chat, only a minority still are using more advanced online and digital tools. Helping the long tail of small businesses adopt new technologies should be as an important priority for the Government’s Industrial Strategy as funding cutting edge research.
At the same time, the UK faces a shortage of 5 million workers in digital skills by 2030. In order to address this, we will have to do a better job at helping existing workers to retrain with new skills, as well as better tapping the potential of underrepresented groups.
The Government should:
- Help workers retrain by partnering with businesses on new digital professional certificates. These could complement existing work on digital and technology T-levels by offering shorter courses aimed at people already in the workplace who are looking to retrain.
Support UK small businesses to help them learn new digital skills and invest in technologies such as cloud. Encouraging greater adoption of digital technology is likely to be one of the most powerful ways of boosting UK productivity, particularly among the long tail of small companies that have struggled in recent years.
Introduction
2020 was a year when having access to information mattered more than ever. From checking whether your local shop was open, to keeping up to date with changing lockdown restrictions, we turned to Google services to help us stay on top of rapidly changing circumstances. Three of the top five Google searches in 2020 related to Coronavirus. In 2019, the top ‘How to’ search query was how to watch the Champions League final - in 2020, it was how to make your own face mask.1
But it wasn’t just Search. Whether it was watching Joe Wicks fitness videos on YouTube, collaborating with a colleague on Google Sheets, or connecting with your school in Google Classroom, Google services helped keep Britons informed and connected.
Google Search interest: How to cut your own hair, How to make sourdough, Best home workout
While 2020 was a difficult year, it also helped bring about an acceleration in many long term changes that are more positive. For the first time, millions of small businesses experimented with online sales and delivery, while much of the workforce frictionlessly shifted to a remote working model. Tools like Google Ads, Google My Business, and Google Workspace were crucial to making this happen.
For this report, Google commissioned independent consultancy Public First to explore how Google products are helping British workers, businesses, content creators, nonprofits and families throughout 2020. In total, we estimate that Google’s core search and advertising tools helped provide an estimated £55 billion in economic activity in 2020 for over 700,000 businesses in the United Kingdom. In total, we estimate that Google supports over £60 billion in the UK economy.
In the first half of this report, we explore some of the different ways Google helped create value for families, workers and businesses throughout a difficult year:
- Helping out in everyday life. Throughout the Covid-19 pandemic, Google services have helped keep us informed, and families remain connected. We look at why users continue to choose to use Google services: saving them time, making it easier to learn and enabling new types of entertainment.
- Helping workers get things done. We look at how Google tools and services have helped keep workers and businesses productive throughout the pandemic.
- Helping small businesses connect with new customers. We look at how Google services and targeted advertising enable small businesses to reach new markets, earn a high return on investment and rapidly adapt to the changing circumstances of the last year.
How we quantified Google’s impact in the UK
In this paper, we used a range of different methods to quantify the economic impact and helpfulness of Google Search, YouTube, Android and other Google products:
- Building on the precedent of previous Google impact reports from markets including the UK, the United States, and Europe, we used traditional economic modelling built upon third-party estimates of Google market size in the UK, and standard returns on investment (ROI) to measure the economic activity driven by Google’s core products.
- Working with independent providers Dynata and Kantar, we conducted extensive polling of a representative sample of over 5,000 individuals representing every region in the UK.
- At the same time, we polled 1,000 senior business leaders from small, medium and large businesses, representing a range of different industries.
To learn more about our modelling approach, please see the Methodology section in the report’s appendix.
Public First is a member of the Market Research Society. The full tables for all the data used in this report is available to download from our website here and here. While Google commissioned this report from Public First, all economic estimates are derived from official, third party and Public First’s proprietary information.
Section 1: The Impact of Google during 2020
Helping Families in Everyday Life
Keeping Families Informed and Learning during Covid-19
Do you remember what life was like before Google?
It used to be that the only way to find the information you needed to answer a question was to make a trip to a local library, or be lucky enough to have a knowledgeable friend. Today, the information we seek - from who won Love Island to the latest lockdown rules - is only a search away.
Having easy, frictionless access to information is now part of our everyday lives. On an average day in Britain:
- 3.6 million people will use Google Search to look for a job
- 3.2 million people will use YouTube to learn about fitness or health
- 3.7 million people will use Google Maps to find a local business
Throughout 2020, Britons turned to Google services to help keep them informed, up to date, and safe.
Google Search was one of the most important platforms through which Britons kept up to date with official advice:
At the same time, Google Maps helped keep us more in touch with information in our local area:
Joe Wicks
When the UK went into lockdown in March 2020, we all had to find new ways of keeping fit and healthy at home. For many the fun, friendly workout videos created on YouTube by Joe Wicks were the answer.
Created with kids in mind, Joe’s PE videos aim to recreate the benefits of PE lessons for children at home following schools being closed. They’ve helped millions of people keep active, and in April he broke a world record when 955,158 people tuned in to watch one of his live sessions.
Joe went one step further though and donated the profits from his videos to the NHS. Alongside a marathon 24 hour workout for Children in Need, he managed to raise over two and a half million pounds. For this incredible effort, he was made an MBE by the Queen at the end of 2020.
Joe’s a father of two himself, and has kept his series of videos going through every lockdown and through his platform has helped so many children stay healthy during a very tough year.
For children and families, Search and YouTube have played an important role in helping keep learning going even when schools aren’t open.
Google Classroom is a free service offered by Google that makes it easy for teachers to share lessons, homework and feedback with their pupils. Over 100 million students and teachers now use Google Classroom worldwide, and in our polling 30% of parents with school aged children said their children had used Google Classroom.
Of those parents:
LEO Academy Trust
LEO Academy is a multi-academy trust that operates six schools across seven sites in the London Borough of Sutton, with 3,500 pupils and more than 400 staff. It is committed to excellence for all in every school it operates, and its board believed the cloud migration was crucial to their strategy.
Previously, it was difficult for different teachers, schools and sites to collaborate. But now the Trust takes full advantage of Google’s education programmes, including all the software needed for the classroom and collaboration - Google Classroom, Gmail, Google Calendar, along with Google Docs and Google Sheets functionality. With support and funding from the London Grid for Learning (LGfL) the school has invested in Chromebooks for its students.
It’s a transition that has freed teachers up from paperwork, while giving pupils the tools to be creative. In the wake of COVID-19 school closures, it has also allowed teachers to continue their lesson plans, and students to get on with their studies outside the classroom, with minimal latency or interruption.
“The impact of Google Workspace for Education has been transformational. UK schools are struggling to innovate and provide their pupils with critical digital skills due to decades-old, ineffective IT estates. With the support of our partners and the latest tools from Google, we’ve been able to be more strategic with our digital planning. We’re driving improvements and efficiencies without breaking the bank.” Phillip Hedger, CEO of the LEO Academy Trust
Hwb
Hwb is the digital platform for learning and teaching in Wales. It provides around 550,000 people from over 1,500 schools, including students and around 80,000 teachers, with access to a wide range of centrally-funded, bilingual digital tools and resources. The platform allows teachers to quickly and easily create private networks for their schools, where they can collaborate, share ideas and materials that can be made available for other users across Wales.
In the middle of lockdowns and a pandemic, access to Hwb is helping deliver a smooth transition to distance (and soon blended) learning. Google for Education and Hwb have worked together to make Google Classroom as accessible as possible, including providing it in both English and Welsh. A dedicated Classroom button has also been included in the Hwb user management portal, allowing teachers to create a fully populated virtual classroom with a single click.
The Welsh Government is also supporting the distribution of around 10,000 refurbished devices, upgraded to Chrome using CloudReady by Neverware, to digitally excluded learners across Wales. The rebuilt devices will provide learners with access to the Hwb learning platform, which provides cloud-based tools such as Google Workspace for Education to ensure teachers can continue helping learners with their studies even outside the classroom.
This approach has enabled schools to supply their learners with the equipment they need, without the delays currently being experienced with purchasing new equipment and for a fraction of the price.
Google’s tools for online security
Data makes Google services more helpful and relevant, whether that’s providing users with the quickest route home in Maps, or suggesting the YouTube video you might enjoy watching next. By aggregating and anonymising data to a population level, it can create smarter software that can more easily identify traffic jams, potential spelling mistakes or new cultural trends. Google is committed to keeping users informed about what data is collected, how it’s used and why.
The company has committed to two key principles: Google does not sell personal information to third parties, and the end user should always remain in control of their own data.
The company offers multiple tools to help individuals and families stay safe and choose the privacy settings that are right for them, including:
- The Google Account, a hub for privacy settings and controls, is home to Dashboard where you can see an overview of the Google products you use and the things you store like emails and photos. Google Account is also home to My Activity, a tool that makes it easy to see or delete data collected from your activity across Google services, including things users have searched, viewed, and watched.
- Auto-delete controls, to make it easier for our users to manage their data by adding new automatic deletion options. Users are able to delete all or part of their account data at any time and they can always adjust their settings to control what data is stored in their account.
- Google has championed data portability for a decade, well before it was legally required to do so. With the Data Transfer Project, they have provided open-source code so that a company of any size can build the data portability tools that enable users to switch easily between services and products they like best.
- Easy to use Privacy and Security Check Ups, helping families and businesses follow best practice and stay in control of their own data.
- Helping users stay safe from threats, with industry leading encryption, automation blocking of malicious email in Gmail and automatic updates to Chrome and Android to ensure they always have the latest security fixes.
Democratising Access to Information
Like the vacuum cleaner or dishwasher for generations past, today Google Search is an essential household tool helping us save time - and freeing up our leisure. In total, by making it easier to find information, we estimate Google Search saves the equivalent of an extra free day of time per person, per year. That’s enough time to binge Bridgerton three times over, play a hundred rounds of Among Us, finally read Moby Dick or listen to Wagner’s complete Ring cycle.
But as well as saving Britons time, democratising access to information has changed the world:
- It helps lifelong learners. 72% of Britons say they have used Google Search in the last month to research a topic, and 25% to learn a new skill. From making sourdough bread to learning an instrument, many passed the time during lockdown by picking up a new hobby.
- It makes it easier to try out new things. 51% of Britions say they have used Google Maps to find new things to try. For people confined to their local area, 2020 was an opportunity to really explore the businesses around them.
- It enables a long tail of niche interests. There are over 1.8 billion websites on the Internet, and 720,000 hours of video uploaded to the internet a day. Whether you are into an obscure band from the seventies or want to debate battle tactics in the Ancient World, the Internet makes it easy to find a community who shares your passion.
There are some kinds of information for which text will never be the perfect medium: the right form for a push-up, how to interpret the instructions for assembling furniture or the right strumming pattern for your favourite song.
In the past, there was no way of accessing this kind of specific, short-form content — but today YouTube makes it easier to find or distribute videos of any length, on any topic. 51% of British YouTube users have used it in the last month to learn something.
In our polling, we saw little difference between ages, genders, social grade or levels of income on how frequently they used Google Search.
Google’s model, free at the point of use, makes it possible for everyone, no matter their background to benefit from the power of digital search and online information.
Relative usage of Google services (1= national average)
Why People Use Google Services
Google did not invent the search engine, online maps or the smartphone. In 1998, when Google Search first emerged, there were already many popular search engines such as AltaVista and Ask Jeeves. Before the arrival of Google Chrome, many worried that the internet browser market would be dominated by a single company.
Instead, their innovation has come primarily from finding ways of making technology faster, more powerful, and more accessible:
- Larry Page and Sergey Brin’s PageRank algorithm, building off the links that already existed on the internet, helped create a far more accurate search engine.
- Gmail offered an order of magnitude more free storage than rival web email services, as well as powerful new features like conversations.
- Google Chrome offered a significantly faster browsing experience and easy management of browser tabs.
- Android made it possible for phone vendors to offer powerful smartphone features to all their users, without paying expensive licensing fees.
61% of our polling respondents said that they had used a different search engine in the past, and 88% another internet browser. When we asked people why they now used Google, they overwhelmingly claim to have chosen Google services because they found them more helpful:
In general, they found Google Search worked better than the alternatives:
Neither did they only stick with Google services because they were unaware how to change defaults, or how to switch to different search engines or browsers::
What is your favourite Google product? 2
Answers were in response to the question: ‘In your own words, which is your favourite Google product - and why?’
"I couldn't go a day without Google Search. I use it at least 10 times per day."
Man, 73, Manchester
"Google Search - it is the most useful thing, having all information at the click of a button."
Woman, 19, London
"Google Maps always gets me to where I want to be."
Man, 60, Witney
"Google Earth, as I can look at anywhere in the world - including my own back garden."
Woman, 72, London
"My favourite Google product is YouTube. It's unique, there's no other service out there like it and I find the content better than normal TV."
Woman, 32, Dover
"Google Classroom - a godsend for my son for homework, especially during self-isolation."
Woman, 39, London
Keeping Families Connected and Entertained
As well as keeping us informed, Google services played a vital role in keeping families entertained and connected in a time when it was hard to get out. From pioneering cloud gaming with Google Stadia to making it easier to stream TV shows with Chromecast, Google products and services helped take our minds off a difficult year.
For younger generations, YouTube was particularly important. In 2020, Britons under 34 watched an estimated 8 billion hours of YouTube.
Which of the following have you used Google search / YouTube for since the start of the Covid-19 pandemic in March 2020?
At the same time, Android was one of the most important platforms for making sure we could keep in touch.
Which of the following have you used Google Maps / your phone for since the start of the Covid-19 pandemic in March 2020?
Google’s products are creating significant value for consumers
In this section, we’ve looked at the different types of value Google creates for ordinary families, from time saved to democratising access to knowledge. Much of this value is not captured in traditional economic metrics like GDP, which focuses largely on goods with a monetary price. Just because they are not included in GDP, however, does not mean that they are not important.
In our previous impact report in 2018, we found that the average Briton would rather give up their car or an hour’s sleep than online search - and that services like Google Search, Maps and YouTube were likely creating tens of billions of pounds in consumer welfare.
An alternative measure of welfare often used by economists is the consumer surplus. The consumer surplus of products that are offered for free, looks at how much a product is worth to a user - how much you would have to compensate them to lose it. The consumer surplus provided by free internet products such as Google Search is often enormous - as we have seen throughout this report, by making it easier to access information, search engines save significant time in both our home and work lives.
Despite all the changes to the world in 2020 we saw that the value Google’s services were creating had held up. In 2020, our central estimate is that Google’s core services are creating a consumer surplus worth a median of £37 per person per month.
Depending on their methodology, other studies have produced a large variety in estimates of the size of consumer surplus created by internet services - although the majority find that it is likely to be significant. For example, McKinsey (2011) estimated that online search created a consumer surplus equivalent to £3 per month,3 whereas conversely Brynjolffson et al (2017) estimated that the value of online search as a whole could be as high as £10,000 per person a year.4 Many of these studies, like ours, draw on direct survey evidence where we ask consumers whether they would be prepared to lose access to a service for a given amount - but the resulting valuation can vary considerably depending on the exact framing of the question. Given this wide range of estimates, we believe our estimates present a conservative central case.
In addition, we also found good evidence that these services were even more important during a lockdown than in normal times. On average, our respondents estimated that Google’s core services were 5% more valuable to them during a lockdown.
Helping Workers Get Things Done
Helping Businesses Adapt
How often do you use a search engine as part of your job? How about your phone?
New technology has long been an important driver of higher productivity for companies and workers. Online tools such as Search, Maps, and cloud software such as Google Workspace are increasingly important for a wide range of jobs — helping Britons find crucial information, collaborate better or gain new skills.
Online tools became even more important in 2020, as much of the workforce were forced to switch to remote working in a matter of days. Whereas in 2019, just 5% of the workforce worked remotely, in 2020 37% of British workers got on with their job from home.5
When we asked British workers how hard their job would be to do without access to core online services:
A 2015 Forrester Consulting study estimated that the deployment of Google Workspace, including tools like Gmail, Drive, Calendar, Meet, Docs, Sheets and Slides had the potential to save employees between 15 minutes to two hours per week at work, in more efficient collaboration.6
Based upon this, and other research on the time saved by Google Search,7 we estimate that in a given year, Google services could be saving workers over six hundred million and producing a £30 billion improvement in productivity for the British economy.8
Just Eat
Staying at home means eating at home, so hundreds of thousands of people across the UK have turned to Just Eat, which has been pioneering food delivery in the UK since 2001. While the lockdown meant a greater demand for food delivery, Just Eat, and the thousands of restaurants it partners with, faced the same COVID-related restrictions as anyone else.
Besides prioritising the safety of its staff and keeping the business running remotely through Google Workspace, Just Eat also coordinated a major promotional campaign offering discounts for National Health Service (NHS) workers. Working with several government and community stakeholders, Just Eat mobilised the campaign within weeks with the help of Google Meets.
“To help us launch the campaign as quickly as we did, Google Meets played an important role as we were able to get the development and commercial teams into discussions with the NHS,” says Richard Haigh, CTO at Just Eat. “That kind of collaboration is at the heart of what makes it possible for us to react so quickly, and it pays off so nicely when it’s for a good cause.”
Businesses told us that continuing to operate through lockdown would have been difficult, if not impossible, without online tools:
Workers agreed that online tools had helped keep them productive:
Google tools were among the most important online tools that kept businesses going. 22% - or over 500,000 businesses - said that Google Workspace has been essential to their ability to keep operating during Covid-19, while another 25% of businesses said that it had made remote working much easier.
When we asked businesses which tools and working practices they were likely to keep using after the pandemic finished:
DFS - Keeping businesses connected, whatever the circumstances
The impact of COVID-19 on retailers has been profound. The UK government’s stay-at-home orders came as home furniture store DFS had just finished migrating to Google Workspace, but fortunately the retailer was already prepared. It accelerated the migration of important documents to Google Drive and distributed a work-from-home guide to its employees.
Within minutes of the lockdown, senior executives at DFS were collaborating on Google Meet to work on a strategy. The very next day, they put their plan into action, halting deliveries and closing DFS manufacturing and distribution centers to keep the workforce safe.
With every new government announcement since, senior staff have collaborated in real time over Google Docs, Google Sheets, and Google Slides to continue giving up-to-date, accurate guidance to the DFS workforce, keeping them connected, even while apart.
Making Businesses Smarter with Google Cloud
As important as online tools is, the underlying cloud infrastructure that helps power them. In 2020, we saw the power and resilience of cloud services to help businesses rapidly adapt and innovate.
To start, cloud services such as those provided by Google Cloud, make it much easier for businesses to match their IT resources to their needs, avoiding unnecessary expenses and enabling economies of scale. It also means that when the unexpected does happen - like a global pandemic, forcing the whole business remote - a company can rapidly react.
The flexibility enabled by the cloud generates significant savings for businesses. A recent report by Deloitte found that businesses have seen an average net return of up to £2.50 for every £1 invested in cloud services such as Google Cloud. Some of the most successful Google Cloud customers saw returns of up to £10 for every £1 invested.9
Beyond cost savings and flexibility, the cloud also unlocks other key benefits including:
- Innovation. The cloud is an important enabler of innovation and digital transformation in general - and more specifically, key technologies like big data, machine learning and AI-driven solutions.
- Security and resilience. Cloud service providers that provide their services at scale can invest greater resources in secure infrastructure solutions and capabilities with respect to cyber risk detection and response. Google has created processes to help ensure the security of its hardware, including designing custom chips. In addition to building-in security, Google designs highly resilient systems where data centres are geographically distributed to minimise the effects of regional disruptions, such as natural disasters and local outages, on global products.
- Sustainability. By applying tools such as AI to help design its data centres and cloud regions, Google has helped significantly increase their energy efficiency: they use 50% less energy than a typical data centre, and compared to six years ago, achieve seven times as much computation power with the same amount of electrical power. Since 2017, Google has matched 100% of the electricity of its operations with purchases of renewable energy.
Ocado
Grocery retailers across the globe have seen huge spikes in demand for online delivery due to lockdown conditions. In this environment, Ocado Technology has supported its UK retail partners in delivering 40% more groceries than pre-lockdown, while also launching new ecommerce deployments for retail clients in France, Canada, and Sweden, to assist them in serving more customers during this time.
Google Cloud helped Ocado Technology keep moving during lockdown, supporting human operators to remotely oversee maintenance of the company's unique bot swarm that picks customer grocery orders. “I’m incredibly pleased at the rate we’ve adapted,” says James Matthews, CEO at Ocado Technology. “Ultimately, it has led us to appreciate even more how our investments in technology can make us more efficient.”
Helping Small Businesses Connect with Customers
Helping businesses adapt during lockdown
With Covid-19 forcing many physical stores to have to repeatedly shut, online sales and advertising became ever more important in 2020. Independent estimates suggest that the share of online retail increased from 19% to 30% as a result of the pandemic.10
Based upon our business survey, we estimate that:
Throughout the pandemic, businesses that could not open otherwise turned to Google Ads to help them to continue to sell. 30% of businesses say that the proportion of their customers that come from online search or search advertising has increased since the start of lockdown, compared to just 9% who say that it has fallen.
By helping businesses shift to online sales for the first time during 2020, we estimate that Google helped support £17 billion in economic activity. That is the equivalent to all the GDP supported by a city the size of Bristol.
Many of these changes are likely to continue, even after the pandemic is over. 58% of businesses - or 180,000 in total - who have started selling online for the first time as a result of the pandemic say that they are likely to continue doing so in future.
How one village-based shopping solution is helping local businesses survive lockdowns
Many people have business ideas – but it takes a special someone to turn an idea into a business. For Jodie Tyrrell, it was COVID-19 that convinced her to take on the online retail giants with her own super-personal local shopping service – and Google mentoring helped her make it a success.
Living in a small village near Manchester, Tyrrell first had the idea for a business that streamlined local shopping by allowing consumers to place a single order across several stores in 2018 – but then stalled. “Life got in the way until 2020, as I had a full-time job and didn’t know where to start,” she says. “And then the need for a way to support local stores really became obvious.”
With a simple website already in place, Tyrrell contacted Google for help, and was introduced to the mentorship programme for small businesses. Thanks to an instant rapport with her mentor, things immediately shifted up a gear. “Christine understood my idea, and really helped me with focus and accountability, and specific technical things like analytics – allowing me to tweak the flow of my website to streamline the customer experience.”
From that point on, there was no stopping her. With a soft launch in August 2020, Tyrrell quickly partnered with several local businesses, including a fishmonger, butcher, and toy shop. Orders are delivered in low-emission vehicles, and older customers enjoy seeing the same friendly face every delivery day. Over the coming year, Tyrrell plans to play to her strengths, hiring a web developer to optimise the site as she focuses on building relationships with more businesses. She’s also considering expanding to cover a larger area.
Tyrrell is aware of the competition, but thanks to Google mentoring, she’s built up a clear picture of her business’s strengths and knows how to use tools to understand who her ideal customers are. “Other delivery companies are moving into the area, and it’s something I’m mindful of, but I offer a personal service that’s respectful of my partners’ profit margins,” she says. “I’m quite proud of the relationships we’ve developed with our partners, including one deli that opened just before lockdown and then took an order for nine Christmas hampers – it’s huge for them.”
#DearLocal
Local businesses are core to our communities, but the impact of COVID-19 has been hard on business owners. To support their recovery, Google has created a package of products, tools and services as part of their #DearLocal campaign.
The campaign aims to help one million small businesses remain open by the end of 2021. As part of this one million, they will train 100,000 people through their digital skills programme - Google Digital Garage.
£25m in online ad credits are being offered, along with 10,000 hours of free mentoring for local businesses. Provided by Googlers and Google Digital Garage trainers, the mentoring will guide businesses through everything they need to know about working with digital tools; from how to build a strong profile on Google My Business, to attracting customers through local listings, and increasing customer sales through social media.
They’ll also focus on practical tips on how a local businesses can restart and adapt l to tell their customers what’s new, whether that is adding new business hours, offering takeaway, or integrating online bookings.
Helping businesses find and reach new customers
One reason that businesses are likely to continue using online channels, even after the pandemic ends, is that they offer a powerful means to let small businesses reach new audiences.
In the past, only big businesses could afford advertising. The cost of an average 30 second prime time TV advert is around £40,000.11 That means it is only likely to be viable for big companies and mass market brands - but is less useful for the long tail of small companies and niche products.
The internet, by contrast, makes it possible for companies of any size to advertise globally - but to do so in a way that their advertising is personalised for at those who it is most likely to be relevant for.
There are many benefits to personalised advertising:
- For consumers, it means adverts are more likely to be relevant and immediately useful.
- For businesses, it lets them better see what adverts are actually working - and focus their messaging at people who might be interested in it.
- This in turn makes sustainable wholly new types of business, aimed at much narrower niches of customers.
Independent estimates by academic researchers Bernard Jansen and Amanda Spink suggest that for every paid click through a Google Ad, businesses receive five unpaid organic clicks through ordinary search results.12
In other words, even for companies that don’t use Google Ads, free Google tools like Search, Maps and Google My Business are often one of the most important ways that they connect with customers.
In our business poll, 76% of businesses said online search was an important way that customers found their business, second only to word-of-mouth.
On average, Google itself estimates that for every £1 a business spends on Google Ads, it receives £8 back in profit from Google Search and Ads. This is based on two conservative assumptions:
- First, that businesses generally make an average of £2 in revenue for every £1 they spend on Google Ads.
- Second, based businesses overall receive an average of five clicks on their organic search results for every one click on their ads.
When we asked businesses to give their own estimate of the value of Search and Google Ads, the median business across the economy as a whole estimated that around 20% of their revenue came from online search and search advertising. For Google Ads customers this proportion was significantly higher, with between 40-50% of their gross revenue estimated to come through search.
| Number of Employees | % of Revenue from Online Search |
| Micro (0 to 9) | 46.2 |
| Small (10 to 49) | 40.2 |
| 50 to 99 | 44.4 |
| 100 to 249 | 48.7 |
| Large (250+) | 47.4 |
To be conservative, we estimate that search clicks are about 70% as valuable as ad clicks, resulting in a net profit for advertisers of 8x what they spend on Google Ads. A more detailed explanation of this approach is available in the methodology section of the report, and at economicimpact.google.com/methodology/.
In aggregate, this leads to significant additional revenue for British businesses. In 2020, we estimate that Google’s search and advertising tools helped provide £55 billion in economic activity for over 700,000 businesses across the UK.
Google Search and Ads also help to make it easier for businesses of all sizes to export goods and services to customers across the world. In total, we estimate that Google Search and Ads are supporting £6 billion in exports.
Tripling website visits using Google Ads during lockdown
Books and reading are some of the cornerstones of helping children and families learn. With the sudden switch to homeschooling during lockdown, Lynsey realised, parents would need diverse, inclusive books more than ever. Using Google tools she has managed to find new customers for her children's books and, since March, her website visits have tripled, selling more books than ever.
“Google my Business has helped us to help our customers. We could let them know we were still open for business and fully stocked up with children’s books. It is amazing to have a versatile and visible storefront apart from the website that drives traffic to our products, helping people to find us and trust us.
“When the schools closed, parents and carers were suddenly doing a lot more searching for home schooling and home education resources and we wanted to let parents know books were an important part of that. Particularly diverse children’s books that would continue to teach them about the world and transport them outside of their ‘normality’ during this time. So we created ads that referenced that. Google Ads helped us to reach an audience that might not have otherwise found us.
“Using Google Analytics we can see that our website visits tripled from March to April and we sold the most books we have ever sold in a month.”
Lynsey Pollard, Little Box of Books
Enabling Anyone to be a Creator
The internet has made it possible for everyone to be a creator. In the past, the biggest barrier to independent creators was often distribution: finding a way to let other people enjoy your writing, music, film, or art — and ideally, pay for it.
Today, tools like AdSense, YouTube and the Play Store have allowed teams of any size to distribute content and earn revenue across the world. This has enabled a long tail of diverse content, fuelling new formats from serialised web fiction to vlogging. Over 500 hours of content are uploaded to YouTube every minute,13 while over 2.9 million apps are available to download from the Play Store.14
For developers, Android provides access to over 2 billion monthly active users across 190 countries worldwide. The average consumer in advanced economies regularly uses over 30 apps, with just under 100 apps installed on their smartphone.15
In total, we estimate the Android App Economy generates £2.8 billion in revenue for British developers.16 Alongside direct revenue from the Google Play Store, developers also receive a significant income from contract work developing apps for businesses and brands. Independent estimates suggest the Android developer ecosystem is supporting around 240,000 jobs across the United Kingdom, with around a third of these core development jobs.17
Android Developer, Joe Birch
Playing the guitar is a great skill, but not easy to learn. It’s even harder if you’re living with a hearing or vision impairment.
Giving people who are blind or deaf the chance to learn to play the guitar more easily was the inspiration behind Chord Assist, a Google Assistant app developed by Joe Birch, a Google Developer Expert (GDE) from Brighton.
Using a number of tools, including Actions on Google, Joe was able to create a prototype accessible smart guitar that allows players to interact with the guitar using their voices, and display instructions in a braille format or on a screen built into the instrument.
It’s made learning chords dramatically easier and highlights the incredible innovation GDEs in the Android community are pioneering.
Joe got involved with the programme after speaking with existing GDEs at tech conferences across the UK. He’s written about how much it meant to him to get the GDE profile page added to his social media and the process has now come full circle, with Joe interviewing and bringing new developers into the programme himself.
Amanda Cavallaro
Improving diversity and inclusion is an ongoing mission for so many industries, including the tech sector. For Amanda Cavallaro, a 29 year old software developer in the UK, it’s something she’s personally striving to change.
Originally from Brazil, Amanda works as a Google Developer Expert and leads Google Developer Group Cloud London, one of the most active GDG chapters in the world. Working with Google Assistant, the focus of much of her work is on how the application of conversational technologies and voice assistants can improve people’s lives. For instance, by helping develop tools for less older people less familiar with digital technology to operate devices through voice commands, they too can make use of the benefits tech can bring, without having to master a myriad array of baffling buttons.
But more widely, she’s become a champion of encouraging women and people from diverse backgrounds to pursue a career in tech - she says ‘Don’t be discouraged if you enter a room and you do not feel represented or included there. Your participation is crucial, you can share your perspective and even become a role model for allowing other folks to consider being there as well.’.
For International Women’s Day, she created a dedicated digital playground to help girls learn about HTML & CSS coding in a fun and engaging way, and she is a regular and charismatic speaker at events around the UK and the world, encouraging women and girls to get involved in tech.
At the same time, YouTube has a worldwide audience of over 2 billion users, with over one billion hours of content watched every day. This immense audience supports thousands of independent creators. The number of channels with more than one million subscribers globally has grown by more than 65% year on year, and the number of channels earning five figures per year more than 40% year on year.
In total, the top 10 UK based YouTube channels have over 119 billion views, and an average of 22 million subscribers.18 (By contrast, the top 10 UK programmes on traditional TV in a typical week had just 7 million viewers.)19 In total, YouTube creates an estimated £1.4 billion in economic activity in the UK, and supports the equivalent of over 30,000 full time jobs.
Jessica Kellgren-Fozard
Staying positive during the last year through a pandemic, multiple lockdowns and disruption to our daily lives has been a challenge for everyone in the UK. It’s a challenge though that Youtuber Jessica Kellgren-Fozard approaches with her unique combination of warmth and vintage fabulousness.
Based in Brighton, Jessica is an LGBTQ+ vlogger and presenter who challenges stereotypes. She is deaf, visually impaired and has two inherited rare conditions EDS and HNPP.
Jessica joined YouTube in 2016. Along with her wife Claudia, and dogs Walter and Tilly, she creates videos around her life with disabilities and chronic illness in a positive, uplifting and educational way. A key feature of her videos is her vintage style and passion for ‘Old Hollywood’.
Jessica’s optimistic and upbeat vlogs show how a creator can use their platform not just to inform but also to empower people, helping her gain more than 65 million views and over 825,000 subscribers along the way.
Section 2: Building Back Better
How Britain can harness the power of technology in the 2020s
Introduction
In the last year, we’ve all seen the power of technology. From Oxford University’s rapid development of a low cost vaccine to DeepMind’s breakthrough performance on the protein folding problem, British research has been at the centre of advances that will save the lives of untold millions, while technology has helped reduce some of the damage from Covid-19 by keeping us connected and productive.
As we move into the 2020s, the UK has multiple opportunities to further grow its tech base and ensure its power is available to all:
- Take advantage of new regulatory freedoms. By acting nimbly and using its independence, the UK can become a world leader in innovation friendly regulation, trade deals and standards.
- Become a leader in new technologies like artificial intelligence. From climate change to drug discovery, AI has the potential to make a significant contribution to many of our most pressing challenges.
- Double down on the digital acceleration catalysed by Covid-19. Lockdown has helped bring forward many important trends, from small businesses adopting cloud and online sales, to the revolution in remote working.
However, these changes will not happen automatically - and we should not get complacent. While the UK’s tech industry is the European leader on many metrics, it remains a long way behind the US and other world leaders. To match the per capita rate of VC investment in the US, investment in the UK would have to increase by another 65%. 20 The UK is still suffering from a digital skills shortage, diversity is not improving fast enough, and since the early 2010s the wider taxation and regulation system has become increasingly less friendly to the industry.
The record breaking speed in vaccine development showed how fast innovation can move - we need now to capture the same speed for the recovery.
In order to better understand the strengths and weaknesses of the UK tech sector we:
- Compiled a new tech competitiveness index, bringing together data on how the UK compares to the G7 in research, labour supply, taxation and consumer demand
- Interviewed 10 industry experts, including Peers, think tankers, former Special Advisors and industry experts
- Worked with Google to identify eight clear policy recommendations on the next steps the Government could take to ensure the further growth of the UK tech sector.
In the second half of this report, we give concrete, ambitious ideas on how we believe the UK could genuinely take advantage of its new opportunities - and build a thriving, innovative and competitive tech sector.
1) Increase UK competitiveness: Become the best place to start and grow a digital business.
In 2017, as part of its last Digital Strategy, the UK committed to becoming “the best place to start and grow a digital business.”;21 In our research, we found that this remains a realistic goal for the UK - but there is still a long way to go to make it more than a slogan.
As part of our research, we undertook an assessment over how UK competitiveness compares to the rest of the G7, drawing both on our expert interviews and, where possible, internationally comparable data:
| Pillar | Current | Future potential | |
| Science and Research | Strong | Strong | The UK remains a science superpower - and this is particularly true for digital. The UK has three of the world’s top 10 computer science departments, and is consistently third in the world for computer science citations.22 In our interviews, we saw universal agreement that the UK remains a worldwide hub. |
| Skills and Workforce | Moderate | Moderate | The Golden Triangle has become Europe’s hub for tech talent - but there were some concerns in our interviews over to what extent this would be true in future. While the immigration system has improved, it remains a blocker for bringing in global talent. At the same time, we are suffering from an increasing shortage of basic digital skills. |
| Consumer Market | Strong | Strong | Even before Covid-19, the UK had a more advanced e-retail market than the US - and the last year has seen the adoption of remote working, online retail and advertising grow further. In general, UK consumers are often early adopters of new technologies in our home lifes - to a much greater extent than at work. |
| Tax and Regulation | Moderate | Weak | Many in our interviews expressed concerns about the cumulative impact of recent taxes and regulations on the UK tech ecosystem, which have the potential to raise significant barriers to entry to new start-ups. The UK is no longer seen as one of the most tech friendly countries. |
| Finance and Capital | Strong | Moderate | The UK remains the clear leader in European tech investment, but there were some concerns among those we spoke to that the next generation of start-ups will have struggled to raise angel and other initial capital during the last year. The UK still lacks the equity culture of a Silicon Valley. Equally, some remained concerned about the impact of potential restrictions on exits to larger or foreign companies on expected returns. |
What the experts say: The UK’s strengths
"Covid-19 has really been an accelerator of online retail. In 2020 our business had five times the sales we had in 2019. We hired a lot of people. And that's despite not being able to do our two product launches, and losing out on major retail contract. Online will remain core to what we do."
Rachael Corson, Co-founder, Afrocentrix
"When you think about the three things that make the UK an attractive place to be: you've got lots of capital available, you've got great talent, and you've got relatively friendly regulation. All of these three needs to remain true for it to continue being a great place to start a business."
Marta Krupińska, Google for Startups
"
I think the UK is in a good position -- better now than it was two years ago, because I really think the uncertainty and looming threat of Brexit was so paralyzing for too long. Obviously there is still much more to work out and clarify in terms of changes as a result of Brexit, but I would characterize the UK tech sector as very healthy right now. There’s a lot of activity, and significant volume.
I believe 2020 ended up just compressing what would have normally taken two or three years in terms of digital adoption, customer acquisition, and tolerance of digital services. People didn't feel like things had to be perfect during the pandemic so everyone was willing to beta test things, and understood the idea of trial and error. All of that helped to compress the amount of time that it would have normally taken to aggressively roll out so many digital propositions and services without a pandemic.
" Eileen Burbridge, Passion Capital
"You can't look at the ecosystem in the UK and say that it's not looking strong. The reality is that if you take, for example, the investment numbers into UK technology companies, from a VC perspective, they're looking incredibly strong considering the broader challenges of the pandemic. And that reflects trends that we've seen pretty consistently over the course of the past five and ten years."
Dom Hallas, Coadec
"The tech industry is one of our greatest strengths as a country and in the last few years there has been impressive growth in digital entrepreneurship and the financing of tech start ups. But that also extends to infrastructure now within the eco-system and the UK's ability to attract talent, all of which appear to be moving in a positive direction. It's exciting.
There are a few caveats to that. Firstly, I think we should all be increasingly aware and keen to tackle the kind of regional concentration and the fact that London and South East do increasingly dominate funding, talent and the headquartering of companies. We have a very lopsided, skewed R&D investment system, that spends far more money in London and the South East than it does elsewhere.
Secondly, I think there is an increasingly a slightly cluttered institutional and regulatory landscape around the tech industry, which at the moment is relatively benign, but could become frustrating and potentially difficult for the industry if it doesn’t kind of get cleared up and streamlined in some ways.
Will Tanner, Director, Onward
Compared to other countries in Europe, the UK tech sector continues to grow strongly. In 2019, the UK saw record investment, with the GVA of the tech sector growing six times faster than the UK as a whole. The Golden Triangle accounts for 30% of early-stage investment in Europe,23 The UK has more unicorns than France, Germany and Italy put together, and Manchester is currently Europe’s fastest growing major tech cluster.24
However, per capita investment still lags significantly behind the US. The UK’s digital infrastructure remains behind leaders like Estonia - whose business friendly environment has also helped deliver twice as many start-ups per capita as the UK.25 Other tech hubs such as Berlin are increasingly attractive to new founders. In the last five years, at least six new major regulatory initiatives or taxes have been introduced for the tech industry in the UK,26 many of which disproportionately affecting start-ups and smaller companies that cannot as easily afford the costs of implementing new regulation, expensive content filters or moderation teams.
As important as regulations that raise costs are regulations that prevent new types of company from being created. A quarter of the world’s top companies were only created in the last forty years.27 At the beginning of the last decade, the UK was often at the forefront of regulatory innovation, with new tools like the FCA’s regulatory sandbox designed to make it easier to safely test new models - however looking at sectors across the board, in recent years fewer regulatory innovations have emerged.
Many of those we spoke to suggested that one of the opportunities of Brexit was that it offered the chance to double down on this agenda: making it easy for the UK to act nimbly, create regulation better suited for new technologies and reduce obstacles for start-ups. However, we also heard concerns that today’s regulatory infastructure is still often culturally slow to take the interests of start-ups into account. It is still relatively rare for regulators to evaluate whether the assumptions in their initial impact assessments were correct, or to take account of the opportunity cost of delaying new innovation.
What the experts say: Regulation and Competition
"One big question that has been on people's minds for a long time is what happens to talent after Brexit? I know companies that have had people walk away from roles in the UK because of the changes and uncertainty. On the other hand, Brexit is happening and we have to look for upsides. If we can use this moment as an opportunity to reform tech regulation — not necessarily a bonfire of regulation, but rather modernising for agility, access to markets and free flow of data — then there's an interesting space the UK could carve out. What you want to become is the best place on the planet for scaling up new technologies and businesses that have the potential to revolutionise things but haven't yet been proven at scale."
Chris Yiu, Tony Blair Institute for Global Change
"So we celebrated that last year saw the largest amount of money deployed in UK startups, $15 billion. And like, that's cool. But when you've looked into it you see that it's mostly going to companies that were started at the beginning of last decade. We need to make sure that there is enough impact and emphasis for those that are being started now. Something that I found really worrying from industry reports is that European founders are now saying that if they were to move out of their home country and go someplace else to start a business they would now choose Berlin over London."
Marta Krupińska, Google for Startups
"Which areas now are we going to need to regulate over the next ten to 15 years, which we can now do more quickly? It’s about areas of tech where there is not currently a regulatory system and the UK can move ahead, be pioneering and set standards that others then follow."
Former Special Adviser
"Regulation is important but can be an inhibitor in certain contexts, especially for start ups that need to demonstrate innovative products. By creating more living labs, the government could give deep tech startups opportunities to conduct large scale commercial trials in a safe environment. Government could also go one step further by marketing such demonstrator sites abroad. Ultimately, startups are looking for product-market fit, so even if UK startups can only demonstrate their technologies in the UK then get sales elsewhere, that is also a good thing."
Elizabeth Nyeko, CEO, Modularity Grid
"There is a lot happening in the UK, for example on the development of Artificial Intelligence. The UK has a vast amount of expertise and talent and many expert institutions, some recently created, but at the moment there are so many initiatives it is causing fragmentation. This could jeopardise the UK’s potential in the long-run turning one of our great strengths into a weakness. That is why the House of Lords Liaison Committee in its follow up to our 2018 AI Select Committee report recommended that a Cabinet Committee be created to ensure better coordination across Government."
Lord Clement-Jones, Spokesman for Digital Economy, Liberal Democrats
Policy Recommendations
Introduce Innovation Impact Assessments to better measure the full impact of new and existing regulation
In principle, all UK regulation already goes through a regulatory impact assessment, setting out and quantifying where possible the benefits and costs of each new measure. In practice, the full consequences of a regulation are often hard to predict, and post implementation reviews are rare. At the same time, individual sector regulators often have little incentive to respond to the requests of new companies and innovators to revisit a regulation.
In future, the Government should require Innovation Impact Assessments (IIA) for new legislative proposals that would impact the digital ecosystem and other fast moving sectors. This should include assessments on incentives for continued product innovation, and the impact on barriers to entry into a market. Thiscommitment should also include a new mandatory regulatory check to ensure all tech and digital proposals are technologically feasible and won’t create burdensome user experiences.
In addition, the Government could also explore tasking the Better Regulation Executive agency with performing retrospective assessments for recent regulations, allowing them to better understand and update their initial assumptions about their benefits and costs. In future, they should also explore opening a route for individual companies to appeal a regulation that is disproportionately impacting innovation, and initiate a new retrospective review.
Task the inward investment unit with benchmarking the UK's competitiveness in the tech industry
In sectors like pharmaceuticals the Government has created institutions and recurring publications to monitor the UK’s relative competitiveness, and ensure that policy takes account of the global picture.28 A similar report in the tech sector could help ensure continued focus on how well the UK was doing compared to its peers.
This unit should produce an annual report and dataset benchmarking the UK’s competitiveness and monitoring areas like:
- The level of inward and domestic investment
- The pipeline of growing companies, from start-ups through scale-ups to unicorns
- How easy it is to grow a digital business
- Relative levels of taxation and regulation
- The supply and demand of talent
- Any promising policy ideas from other countries the UK could seek to replicate
2) Become a Digital Global Leader: Unlock the power of data
Every year, Google is among the world’s biggest investors in research and development. At the end of 2019, its R&D spend had increased almost 10 times over 10 years, from $2.8 billion to $26 billion. The research from Google and other Alphabet companies such as UK based DeepMind is playing an important role at the cutting edge of technological innovation - from artificial intelligence, to self-driving cars, and quantum computing.
Data is likely to be at the heart of solving many of the challenges of tomorrow. In the future, data and machine learning look set to play a key role in helping us more rapidly develop new drugs and vaccines, increase the efficiency of public services, reduce transportation accidents, create a smarter energy grid, and better protect wildlife diversity.
The same sorts of AI technology that were used in 2016 to beat the world champion in Go are now being used to power important scientific advances and real world outcomes. For example, in 2019 working with our sister company DeepMind we used machine learning to help predict the variability of wind power, helping better integrate it into the grid, and boosting its value by 20%.29 One recent academic estimate found that AI had the potential to benefit 82% of the UN’s Sustainable Development Goals.30
Another sister company X, is finding and launching new technology moonshots, inspired by labs such as APRA, Bell Labs and Xerox Parc. The UK has recently announced the creation of a new agency ARIA, which is similarly inspired by an ARPA style model of high risk, transformational research. One of X’s newest projects, Mineral, is working to use big data and AI to help farmers better understand and manage the complexity of agriculture - making it possible to grow a far more diverse range of crops, improve soil health and reduce the dependence on blunt tools like chemical fertilisers.31 In the coming decades, we believe similar technology could help play a big role in the UK’s 25 Year Environment Plan and the new farming subsidy system based on Environmental Land Management.
How AI could revolutionise drug discovery
Inside every cell in your body, billions of tiny molecular machines are hard at work. They’re what allow your eyes to detect light, your neurons to fire, and the ‘instructions’ in your DNA to be read. These exquisite, intricate machines are proteins.
Currently, there are around 200 million known proteins, with another 30 million found every year. Each one has a unique 3D shape that determines how it works and what it does.
Figuring out what shapes proteins fold into is known as the “protein folding problem”, and has stood as a grand challenge in biology for the past 50 years. In a major scientific advance, the latest version of DeepMind’s AI system AlphaFold was recognised as a solution to this grand challenge by the organisers of the biennial Critical Assessment of protein Structure Prediction (CASP) in November 2020. This breakthrough demonstrates the impact AI can have on scientific discovery and its potential to dramatically accelerate progress in some of the most fundamental fields that explain and shape our world.32
“This computational work represents a stunning advance on the protein-folding problem, a 50-year-old grand challenge in biology. It has occurred decades before many people in the field would have predicted. It will be exciting to see the many ways in which it will fundamentally change biological research.” Professor Venki Ramakrishnan, Nobel Laureate and President of the Royal Society
Looking more narrowly at the economy, PWC has estimated that AI could add £232 billion to UK GDP by 2030.33 As the world digitalises, an increasing share of trade is likely to become digital. In its early trade deals, the Government has already demonstrated an ambitious Digital Trade agenda, and building on this is likely to be key to helping UK start-ups export their products across the world.
A common theme in our interviews was that digital infrastructure deserved to be considered as important as traditional physical infrastructure. While continuing to improve connectivity through 5G and fibre was essential, there remained other areas where investment needed to increase.
The UK is well placed to reinforce its position as Europe's leading data centre market as well as acting as a nexus for pan-Atlantic data flows. Much of the power of the internet comes from the ability of data to travel globally - but that does not mean that there are benefits from hosting your own data centres, from reducing latency for fundamental applications to helping anchor a wider ecosystem of digital companies. It also acts as a powerful symbol of a country's digital leadership and could reinforce its credibility on digital trade. Across Europe, Google has opened six data centres, with the most recent being a €600 mn investment in Fredericia, Denmark. Copenhagen Economics estimates that on average, Google's investments in data centres across Europe have supported around 13,000 jobs a year.34 To fulfill its digital potential, the UK must remain competitive for digital infrastructure investment.
As important as basic infrastructure are the layers in the stack above that: clear standards, digitalising core services and, where possible, opening up data in a way that preserved privacy. Progress in digital government appears to have slowed in recent years - but in the last year, we have all seen the value of joined-up, real time data, to stay on top of pressing challenges.
There are often difficult trade-offs between opening up data, and maintaining user privacy. We heard some concerns that the current regulatory infrastructure was growing increasingly complicated, and more co-ordination was needed between the many different institutions the UK has recently created in this field.
What the experts say: The Importance of Data
"The only thing that matters right now is that the Prime Minister - it has to come from the top of government - has a proper digital national plan. And that involves how he is going to digitise the remaining bits of the public sector that have not had funding or resources within them, how are we going to close the digital divide, how we’re going to build an understanding much more deeply across all areas of society; in government, in legislators, and policymakers. And that is a matter of real national urgency, because I don't believe we will be able to recover from the pandemic or provide perspective if we don’t."
Martha Lane Fox, House of Lords
"Over time I don't think digital will be its own sector. I think when talking about businesses, whether commerce or any other trade, all of it is going to have digital within it. "
Eileen Burbridge, Passion Capital
"Identifying future infrastructural needs, with all those classic features that make it very unlikely they'll be provided by the private sector, makes perfect sense. We should not expect them to look like traditional infrastructure - they’re not all gonna be pipes, and wires, roads, lanes. They're gonna be things like, common use databases or standards."
Giles Wilkes, Senior IFG Fellow, former FT commentator and former No10 and BEIS Special Adviser
"I think there are many countries doing much better in the sense of making data available, both for research but also for business, and actually developing privacy enhancing technologies. In the UK, the government tends to be quite hands off. I think this is where the government has to just be much more of a leader. That doesn't mean a government does everything itself - but you set a tone and help ensure data is open and secure."
Rainer Kattel, Professor at Institute for Innovation and Public Purpose, UCL
Policy Recommendations
Create a British Research Cloud to democratise access to data, and support UK innovation
At the moment, access to vast volumes of computing power and advanced resources and technology (such as AI and machine learning) to undertake cutting edge research on deep learning and AI is limited to some private research companies and Golden Triangle universities.
A British Research Cloud could provide high-end computational resources to researchers and academics, as well as host large-scale government-held and other public datasets in a secure cloud environment. A national consortium supported by Google and others could provide the infrastructure and access to data for all British researchers and R&D departments, democratising access across different regions - contributing to the Government’s levelling up agenda and strengthening collaboration between different research hubs across the four nations.
Creating the new National Research Cloud would build on existing UK strengths, such as the JANET academic network, and the work done by world renowned academics from the University of Manchester and the University of Cambridge.
Ensure the new R&D roadmap is focussed on long term innovation
As part of its R&D Roadmap, the Government has committed to raising UK R&D funding to 2.4% of GDP by 2027. This can help the UK build on its existing significant strengths in science and research, develop new solutions for important global challenges and do more of the kind of basic research that is unlikely to be funded by the private sector.
In order to ensure that this R&D spending creates most value for the long term, the UK should:
- Identify and focus on key areas of national importance such as artificial intelligence, quantum information sciences, autonomous transportation, biological sciences, chemical and materials sciences, and advanced communications and other emerging technologies.
- Diversify government support for R&D beyond traditional sectors such as defence and health, and focus on sectors that have historically received less funding, including energy, basic sciences, and standards.
- In addition to technical research, support more social science research on the societal impacts of emerging technologies, with the aim of maximising benefits and minimising any potential negative side effects.
3) Levelling Up Digital Skills
Digital technology has long been one of the most important drivers of productivity, with ICT responsible for at least a third of UK growth over the last twenty years.35 However, there has also long been a gap between the best performers and a long tail of small companies that have been much slower to adopt digital technology and new techniques. Around a third of companies saw no productivity improvement at all between 2000 and 2017.36
Does your business use any of the following technologies?
While the majority of businesses now have their own website and use standard tools like video chat or online office suites, only a minority use more advanced online and digital tools. On average, large businesses use twice as many types of online tools as small businesses, and there is a clear difference in the level of adoption across the UK.
Average number of online tools
Google Digital Garage and one-to-one Mentoring
Google Digital Garage is a digital skills programme to help people in the UK gain new skills for their career or business. Since 2015, Google has trained 600,000+ people through online courses, workshops, webinars and mentoring, and they have helped 100,000 people grow in their career or business.
Before the pandemic, Google’s workshops and mentoring were delivered face-to-face through training hubs in 9 cities, open up to 7 days a week to anyone who wanted to learn. Google also delivered workshops in over 500 towns, cities and villages, and toured all over the UK from the Outer Hebrides all the way down to Penzance.
In 2020, the local face-to-face training evolved into a fully virtual programme, with over 25 topics now streamed as live webinars on YouTube. These workshops are still facilitated by trainers in real time (so attendees can ask questions live) and run for 60 minutes. Topics include:
- Digital Marketing Strategy
- Social Media Strategy
- Build your CV and Cover Letter.
For those looking to showcase their new skills, there is a free certification in the Fundamentals of Online Marketing, certified by The Open University and International Advertising Bureau Europe. The course helps users learn at their own pace to build crucial online marketing skills through short videos and end of topic quizzes.
Google Digital Garage courses also offer training for more traditional aspects of working for, and running a business, such as presentation skills, personal branding, self-promotion and effective networking.
For those looking for tailored one-to-one support, Google has partnered with Digital Boost to provide free mentoring to business owners and charities. Organisations can speak directly to Google employees and Google Digital Garage mentors and get realistic, helpful guidance on topics such as setting up a website, starting online advertising, and business strategy.
Google has pledged 10,000 hours of one-to-one support as part of its efforts to support local businesses in the UK through the pandemic, and has also pledged to train 100,000 people by the end of 2021.
For more information, visit g.co/digitalgarage
The pandemic has led to an acceleration in digital adoption:
- Remote working. Whereas in 2019, just 5% of the workforce worked remotely, in 2020, 37% of British workers worked from home.37
- Online retail. The ONS estimates the share of online retail increased from around 20% to over 30% as a result of the pandemic.38
- Cloud computing. 73% of businesses say that online tools have made it easier for their business to keep operating through lockdown, with 57% saying that they expect to make greater use of online tools even after the pandemic is over.
Few of our experts expected the current level of remote working to persist after Covid-19 - but they did expect hybrid working to be much higher than before. This could have important benefits for the economy, sustainability and levelling up:
- Initial evidence suggests that the average skilled worker is more productive working at home, with the potential for remote working to increase UK productivity by £9 billion in future.39
- If we could reduce the average weekly commute by 1 day a week, that would save over 10 million tonnes of CO2 emissions.40
- By reducing the default towards physical meetings, remote and hybrid working can help reduce the dominance of London and the South East, making it easier for start-ups across the country to recruit and obtain capital
What the experts say: Remote Working
"Before Covid there was this bias, for instance in your fundraising, that it's much easier and much better to meet an investor in person. At the minute no one can really meet in person. So it sort of doesn't matter if you're on Zoom or Google Meet in the same city or not. Start-ups outside London are telling us that this is sort of making things a little bit easier."
Marta Krupińska, Google for Startups
"There used to be very little thought about employee well being and work-life balance. I think the pandemic and the rise of remote working have led to companies and leaders having to take a bit more responsibility for that, which is very positive. "
Eileen Burbridge, Passion Capital
"Are we saying we only employ people who've got setups that allowed them to work effectively from home? What happens if you've got a couple of kids or you're in shared accommodation? There’s all sorts of practical issues that we have to think through. On the one hand, there's a potential real opportunity around flexible work and people being able to better balance home and work life. On the other, it could just reinforce the inequalities. What came through, and comes through consistently, when we do survey work about technologies is that people just don't feel that they've got very much agency about it. In our survey work, we’ve found that only one of three workers say that they have been consulted when new technologies were introduced in the workplace."
- Paul Nowak, Deputy General Secretary, Trades Union Congress
"One of the scenarios that may play out is that more people are more comfortable hiring remotely, because actually it doesn't make a difference if you're sat in the south of the country, if you're in the north of the country, or wherever. If I look at that from a North East perspective, it broadens the pool of talent that we can recruit from. On the other hand, it probably means the companies are going to have to start paying more money.
I've not heard anybody telling me that it's going to go back to the way it was. Everybody reports back that it's going to be some form of blended working pattern. Even a lot of the smaller companies I’ve been speaking to have been saying yes, we will have an office but we'll have an office for 10 rather than our workforce of 50.
David Dunn, CEO, Sunderland Software City
"Businesses who demonstrate a commitment to hiring and retaining diverse and inclusive talent will have a competitive environment. What Gen Z cares about is very different to what millennials and baby boomers might have prioritised when looking at where to work. With more of us used to remote working, there is an opportunity now to build back in a more flexible way – for example supporting those who need to balance their work with other commitments."
Riham Satti, CEO, Mevitae
A key priority for the 2020s should be to keep the momentum of the last year going, and help companies and key workers across the economy take better advantage of digital technology.
The Industrial Strategy Council has estimated that on current trends 5 million workers will be acutely underskilled digitally by 2030, forming the UK’s most significant skills shortage. 41 Encouraging greater take up of digital technology could have a significant impact on small business productivity, which in turn could help level up living standards. For example, recent work by Public First found a strong correlation between the use of cloud tools and the rate of growth of a company.42
Much of the focus of the Government’s current Industrial Strategy is targeted at supporting companies at the frontier of the latest advances. While this is important, the UK has always been a leader at cutting edge science - it is in making sure those technologies diffuse across the economy that we have struggled. Multiple of our experts recommended that this was a policy goal with a clear case for greater public support.
What the experts say: Digital Adoption and Skills
"If you look at why the UK’s productivity is much lower than other advanced economies, one of the reasons at a micro-level is the lack of diffusion of often fairly basic technology across UK businesses. Changing that could have a huge impact on UK productivity. And, you know, if you're an optimist, you look at what the pandemic has done, it would have forced a whole bunch of businesses to speed up very quickly in terms of how they use technology, and you think that may have a positive impact on improving productivity for lots of firms.
But there is also a question about what the government can do to drive tech adoption among businesses. In the past, the one thing we definitely did not do was put a big chunk of money behind trying to increase digital adoption. The Government is spending money on R&D like nobody's business. If it invested quite a serious chunk of money trying to drive tech diffusion, I think it would be a very sensible way of spending some of it.
Former Special Adviser
"The government is currently doing an industrial strategy refresh. And I'm not quite sure where tech would fit in that. But actually, what the Government should be doing is ensuring tech runs across all the different sectors. What is that sector’s approach to how we deploy technology? What does it mean, in terms of the skills of the workforce? What will it mean for numbers of jobs? At the moment, we’re still not linking these things together. "
Paul Nowak, Deputy General Secretary, Trades Union Congress
"Since the start of the pandemic we have seen increased digital adoption by businesses of all sizes and sectors. Companies that were only just thinking about investment in cloud based services and technologies such as data analytics have now made the move. This is great news but it’s not enough. We need to support businesses to keep the digital adoption momentum going by scaling up the use of the digital technologies, such as cloud, that they invested in last year and find ways to encourage companies to be brave in trying out and adopting new innovative technologies such as AI and Digital ID.."
Sue Daley, Associate Director Technology & Innovation, techUK
"Among large companies in the UK, there tends to be a resistance to adopting highly innovative products that startups are bringing to market, largely due to an aversion to risk, or their perception of risk. Perhaps the government could address this through schemes that offer large companies some incentive, a tax relief scheme for example, to fund testing and demonstration of innovative products being developed by UK startups. Such schemes could mitigate the perception of risk by reducing the costs associated with adoption of innovative technologies."
Elizabeth Nyeko, CEO, Modularity Grid
"The UK suffers from a longstanding digital skills gap but the problem is there needs to be more communication between all the players involved – Government, industry and educational institutions. There needs to be better feedback loops in this triangle and most importantly greater accountability and transparency about the action that is being taken to remedy the skills gap."
Riham Satti, CEO, Mevitae
"If we are going to succeed as a country, we need to have proper lifelong learning so people can retrain and reskill at regular intervals at a time, location and pace that suits them. The Skills for Jobs White Paper provides a rebalancing between FE and HE but needs to be far more radical to deliver on the high-skill, high-wage economy of the future."
Lord Clement-Jones, Spokesman for Digital Economy, Liberal Democrats
"The first thing is to work out what the community infrastructure is that people need. Good quality broadband, maybe free, then the hardware that they need to learn about the software and so on. And then maybe the hardest bit, is perhaps focusing on and around the skills. In my opinion, that's really not difficult. You just need to put resources behind peer-to-peer networks in places where people are. So, you have to use the points of leverage that you haven't been, whether that's in the library, at the school gates, when you get benefits, whatever it might be."
Martha Lane Fox, House of Lords
Another way to raise the supply of digital skills is to tap the potential of all those we are not currently fully making use of better.
At every level in the tech industry, from computer science students through to C-level board roles, we need to do more to increase the representation of women, ethnic minorities and other underrepresented groups.Just 19% of tech workers are women - compared to 49% of UK workers as a whole - and there has been little change in the proportion of women on tech company boards in the last twenty years.43 Almost three quarters of tech company boards have no members from Black, Asian and Minority Ethince communities.44
Changing this will not happen overnight - but one of the strongest messages from our interviews was that both the Government and the industry itself needed to do much more to take this issue seriously.
What the experts say: Inclusion
"The bottom line is the numbers aren't changing."
Martha Lane Fox, House of Lords
"We’re still lagging behind in terms of how we fill the digital skills gap, which is starting to become even wider due to the demand of this technology. We’ve had this long situation in terms of, you know, how do you nurture homegrown talent within the UK? How do we support groups from underrepresented backgrounds to join, join some of these industries? What we find a lot is that the data on women is, it’s starting to improve, but there's a lot of work that still needs to be done in terms of ethnicity pay gap.
Until companies are ready to have difficult conversations, they are always going to be in this virtual signaling phase where they're saying all the right stuff, but nothing gets done."
Mark Martin MBE, UKBlackTech
"Let's go back to first principles. Why is it that government money goes to startups? What kind of startups does it go to? Is there a case for making sure that a certain amount of that goes to businesses run by underrepresented founders who have had to work harder and overcome more barriers, and therefore are maybe more resilient? And maybe even a safer bet in the long run."
Rachael Corson, Co-founder, Afrocentrix
"Another huge challenge is diversity. And this is not just gender diversity. Less than half a percent of all VC funding goes to black people. Even just gender diversity, less than 1% of all funding goes to all-women teams. And I think 91% goes to all-male teams.
And I think this whole caring about it kind of has to happen across the whole spectrum, from founders caring about it to employees caring about it.
It feels like there's a lot of goodwill - but there has to be a stronger message. If there could be a stronger message from the Government that there would be either an incentive or some form of public shaming. I think we've talked a lot about how everyone cares about diversity, but when you look at the numbers nothing's really materially changing."
Marta Krupińska, Google for Startups
Policy Recommendations
Help workers retrain by partnering with business on new digital career certificates
This training could complement the Government’s new commitment to the Lifelong Learning Guarantee and its existing work on digital and technology T-levels by offering shorter courses aimed at people already in the workplace who are looking to retrain.
Google has proposed partnering with the Government on a large public-private professional certificated programme that will ensure the UK has the right skills base for the digital economy to thrive.
The certificates Google have developed will help students to learn about:
- IT Support: Troubleshooting, Customer care, Networking, Operating systems, System administration and security.
- Data Analyst: Data types and structures, Using data to solve problems, How to analyse data, Data storytelling with visualisations, Using R programming to supercharge your analysis
- Project Manager: Estimating time and budgets, Running effective meetings and managing stakeholders, Identifying and managing risks, Applying Agile and Scrum frameworks, Leadership skills and navigating team dynamics
- UX Designer: Personas, user stories and user journey maps, Conducting usability studies, Creating wireframes and prototypes, Testing and iteration on your designs, Building a professional portfolio
The Google Career Certificate Programme
The Google Career Certificate programme aims to give people with no prior experience the skills they need to get a job . More than 500,000 people have already enrolled globally, with 80% of US participants reporting a positive career impact, such as starting a new career, getting a promotion or a raise within 6 months.
In July 2020, Google announced it would sponsor 100,000 of these new Career Certificates as scholarships in Europe, the Middle East and Africa. Half of these certificates are reserved for under-served groups.
In the UK, Google is currently working with Camden Council to help up to 500 jobseekers and young people to complete a Google Career Certificate by the end of 2021, and is seeking to work with other organisations governemtn = to help 9,000 jobseekers to gain these job ready skills.
Support UK small businesses to help them learn new digital skills and invest in technologies such as cloud.
Encouraging businesses to move online will not only help them adapt to the circumstances created by the pandemic, but will also set them up to thrive in the future.
Accelerating and encouraging digital diffusion should be a key part of the UK’s industrial strategy. By helping to increase the productivity of the UK's long tail of small businesses, we could potentially level up productivity across the UK significantly. The Government should work to build the evidence base on current barriers to digital adoption, and seek to build the evidence base on what policies are most effective in encouraging it.
As part of this, the Government should also remove some of the obvious barriers that stand in the way, such as the differential tax treatment of traditional and cloud computing. The Government should consider expanding R&D tax credits to allow all small businesses to invest in digital technologies such as cloud.
Methodology
Accurately estimating the value created by digital products is extremely challenging – and this is particularly true for products that are offered without monetary charge, are used widely across the economy, and contain elements of both consumption and production, as is true for many Google products.
While we believe our estimates are based on conservative assumptions, it is worth being aware of their limitations:
- Many of our estimates are based on the gross impact of Google’s products, as it is hard to accurately quantify what a counterfactual world without Google would look like.
- Conversely, in some cases we have not been able to fully quantify all the impacts created by Google products, suggesting that our estimates should be viewed as a lower bound.
- Many of our estimates make use of new polling carried out for this report – but as in any poll, consumers may underestimate or overestimate their use of products. Best practice in many of these areas, such as valuing an hour of leisure time or using stated preferences to calculate consumer surplus, remains an area of active academic debate.
- Google did not provide any new or internal data to generate these estimates. All our modelling is based on third-party or public data, alongside our own internal estimates.
- Given the pandemic, 2020 was a particularly unusual year, and it is often hard to estimate what the counterfactual would have been like without Covid-19.
Polling
In order to build a broader picture of the benefits, we conducted extensive public polling to ask individuals and businesses how they made use of Google products, and what difference they made to their leisure, work and society:
- Working with panel providers Dynata and Kantar, and expanding the sample with Prolific Academics' recruitment tool, we polled 7,500 adults to get both a nationally-representative sample and to focus on adults living in the cities focused in this report. In this poll we asked 70 questions about their experience using Google and other online products, before and during the pandemic.
- Working with Dynata we polled 1,000 senior business managers in small, medium and large businesses across the United Kingdom, asking them 30 questions about how Google and online tools are supporting their businesses.
Public First is a member of the British Polling Council, and full tables for all the data used in this report is available to download from our website.
Consumer Benefits
Google Search
Our headline estimate of the total consumer surplus of Google Search is calculated as the geometric average of:
- Time saved. Following the methodology of Varian (2011), we assume that using Google saves 15 minutes per question, with the average person asking 1 answerable question every 2 days. Time saved is valued using the ONS’ estimate of mean hourly earnings, and we scale the overall estimate by third party estimates of Internet prevalence and polling information on Google Search usage. (More information on this overall approach can be found in the Economic Value of Google, a presentation by Google Chief Economist Hal Varian.)
- Stated preference (Willingness to Accept). As part of our polling, we asked participants two discrete binary choice questions:
“Imagine you had to choose between the following options in a time before Covid-19. Would you prefer to keep access to Google Search or go without access to Google Search for one month and get paid [Price]?”
“Now imagine you had to choose between the following options during a national lockdown. Would you prefer to keep access to Google Search or go without access to Google Search for one month and get paid [Price]?”
with the price offered randomised between £1.25, £2.50, £5, £10, £20, £50, £100, £200 and £500. We linearly regressed the results of this poll to derive a demand curve and used this to calculate total consumer surplus per user. Finally, we scaled this estimate by third party estimates of Internet prevalence and polling information on Google Search usage.
Following Brynjolfsson et al (2017), we chose a Willingness to Accept (WTA) rather than Willingness to Pay format for our Stated Preference question as we believed this best matched the status quo, given that the majority of Google Services are free to the end user and required no up-front investment.
As with many other products, the mean consumer surplus is significantly higher than the median – or, in other words, a few dedicated users use it disproportionately more than the average.
In order to ensure that our household level figures were not misleading, we based them not on the mean household value for WTA compensation, but instead a separate estimate of the median WTA. We derived this by regressing our polling data again, using an exponential method which we judged was more likely to accurately represent the bottom of the distribution.
Google Maps
Our headline estimate of the total consumer surplus of Google Maps is calculated as the geometric average of:
- Time saved. We calculate time saved by Google Maps, using estimates of time saved by advanced traveler information systems from Levinson (2003) and total time spent travelling by mode from our polling, calibrated by the Department for Transport’s national travel survey data. Time saved is valued at 37.5% of the estimated hourly income of Google Maps users, following standard practice for calculating the value of travel time savings.
- Stated preference. As with Google Search, we asked the participants of our poll two discrete binary choice questions:
“In normal times (before COVID and lockdown), would you prefer to keep access to Google Maps or go without access to Google Maps for one month and get paid [Price]?”
“During a national lockdown, would you prefer to keep access to Google Maps or go without access to Google Maps for one month and get paid [Price]?”
with the price offered randomised between £1.25, £2.50, £5, £10, £20, £50, £100, £200 and £500. We linearly regressed the results of this poll to derive a demand curve and used this to calculate total consumer surplus per user. Finally, we scaled this estimate by third party estimates of Internet prevalence and polling information on usage. In addition, we constructed a separate estimate of the median WTA compensation for Google Maps which we used for quoted per person and household estimates.
YouTube
Our headline estimate of the total consumer surplus of Google Search is calculated as the geometric average of:
- Time saved. Extrapolating from the methodology Varian (2011), we assume that using YouTube saves 11 minutes per question, using self-reporting polling data to calibrate the number of questions asked. Time saved is valued using the ONS’ estimate of mean hourly earnings, and we scale the overall estimate by third party estimates of Internet prevalence and polling information on YouTube usage.
- Stated preference (Willingness to Accept). As part of our polling, we asked participants two discrete binary choice questions:
“In normal times (before COVID and lockdown), would you prefer to keep access to YouTube or go without access to YouTube for one month and get paid [Price]?”
“During a national lockdown, would you prefer to keep access to YouTube or go without access to YouTube for one month and get paid [Price]?”
with the price offered randomised between £1.25, £2.50, £5, £10, £20, £50, £100, £200 and £500. We linearly regressed the results of this poll to derive a demand curve and used this to calculate total consumer surplus per user. Finally, we scaled this estimate by third party estimates of Internet prevalence and polling information on YouTube usage. In addition, we constructed a separate estimate of the median WTA compensation for YouTube which we used for quoted per person and household estimates.
Gmail and Google Docs
Given that we had no time saving estimates for these products, we instead relied on estimates drawn again from stated preferences, following the same procedure.
We asked the participants of our poll two discrete binary choice questions:
“In normal times (before COVID and lockdown), would you prefer to keep access to [Gmail /Google Docs] or go without access to [Gmail /Google Docs] for one month and get paid [Price]?”
“During a national lockdown, would you prefer to keep access to [Gmail /Google Docs] or go without access to [Gmail /Google Docs] for one month and get paid [Price]?”
with the price offered randomised between £1.25, £2.50, £5, £10, £20, £50, £100, £200 and £500. We linearly regressed the results of this poll to derive a demand curve and used this to calculate total consumer surplus per user.
Finally, we scaled these estimates by third party estimates of Internet prevalence and polling information on each product’s usage. In addition, we constructed a separate estimate of the median WTA compensation for each product which we used for quoted per person and household estimates.
Android
In addition to measuring the consumer surplus individuals received for individual Google services, we also investigated the overall consumer surplus British people receive from their smartphone.
We asked the participants of our poll two discrete binary choice questions:
“In normal times (before COVID and lockdown), would you prefer to keep access to your smartphone or go without access to your smartphone for one month and get paid [Price]?”
“During a national lockdown, would you prefer to keep access to your smartphone or go without access to your smartphone for one month and get paid [Price]?”
with the price offered randomised between £1.25, £2.50, £5, £10, £20, £50, £100, £200 and £500.
We then scaled this number by Android’s market share in the UK and Lee (2016)’s estimate of the proportion of net smartphone consumer surplus, excluding substitution value.
Given the overlap with individual services - one reason we value our phone is because it allows us to access Search, Maps, Gmail or YouTube - and the challenges in decomposing the value attributable to software and hardware, we did not include this estimate in our number for the overall value created by Google in the UK.
Business Benefits
Google Ads
Following the precedent of past Google impact reports, we use third-party data to estimate the total size of the UK Google Ads market, combining PWC Global Entertainment & Media Outlook data on the total UK paid search market with other estimates of Google’s market share.
Following the methodology of the US Google Economic Impact Report, we then scale this revenue by an assumed Return on Investment (ROI) factor of 8, from:
- Varian (2009) estimates that businesses make on average $2 for every $1 they spend of AdWords.
- Jansen and Spink (2009) estimate that businesses receive 5 clicks on their search results for every 1 click on their ads.
- Google estimates that search clicks are about 70% as valuable as ad clicks.
- Total ROI is then 2 * spend + 70% * 5 * 2 * spend – spend = 8 (spend).
This growth is similarly scaled by the ROI factor of 8 and divided by GDP.
More information on this methodology is available at https://economicimpact.google.com/methodology/
We estimate the share of this value created by new online sales by the proposition of estimated spend from companies who say that they have used Google Ads for the first time as a result of Covid-19.
AdSense
In order to estimate total UK Adsense revenues, we scale Google’s 2020 global Traffic Acquisition Costs to network members by UK’s share of global display spending, derived from PWC Global Entertainment & Media Outlook data. In addition, we also include the estimated returns to advertisers, drawing on the estimated ROI of display advertising from Kireyev et al (2013).
Android
We scale App Annie (2019) 2019 data on worldwide app store consumer spend and Android revenue share by Caribou Digital (2016)’s estimate of the UK share of total app store value captured, and a 70% revenue share for the developers. We then scale this by the ratio between app store revenue and total revenue, including consultancy work, derived from Deloitte (2020).
- https://trends.google.com/trends/yis/2020/GB/
- Answers have been edited for clarity and grammar but are otherwise unchanged.
- The Web’s €100 billion surplus, McKinsey, 2011, https://www.mckinsey.com/industries/media-and-entertainment/our-insights/the-webs--and-8364100- billion-surplus
- Using Massive Online Choice Experiments to Measure Changes in Well-Being, Brynjolfsson, Eggers and Gannameni, 2017
- https://wiserd.ac.uk/sites/default/files/documents/Homeworking%20in%20the%20UK_Report_Final_3.pdf/
- The Total Economic Impact of Google Apps for Work, Forrester Consulting, 2015
- Economic Value of Google, Hal Varian, 2011
- Public First estimate built upon Forrester Consulting (2015) and Varian (2011)
- Economic and social impacts of Google Cloud, Deloitte, September 2018
- ONS
- https://www.itvmedia.co.uk/advertising-on-itv/airtime
- https://faculty.ist.psu.edu/jjansen/academic/jansen_click_through_sponsored_links.pdf
- https://www.statista.com/statistics/259477/hours-of-video-uploaded-to-youtube-every-minute/
- https://www.statista.com/statistics/266210/number-of-available-applications-in-the-google-play-store/
- The State of Mobile 2019, App Annie
- Public First modelling built upon App Annie (2019) 2018 data on worldwide app store consumer spend and Android revenue share by Caribou Digital (2016).
- The App Economy in Europe, Dr Michael Mandel and Elloit Long, 2017, Progressive Policy Institute, https://www.progressivepolicy.org/wp-content/uploads/2017/10/PPI_EuropeAppEconomy_2017_.pdf
- Public First estimates from SocialBlade data. Measured by number of subscribers.
- https://www.thinkbox.tv/research/barb-data/top-programmes-report/
- Public First estimate
- https://www.gov.uk/government/publications/uk-digital-strategy/3-the-digital-sectors-making-the-uk-the-best-place-to-start-and-grow-a-digital-business
- https://www.scimagojr.com/countryrank.php?area=1700&order=ci&ord=desc
- Europe, unicorns and global tech diffusion, Benedict Evans, 2020
- Tech Nation Report 2020, https://technation.io/report2020/
- https://2020.stateofeuropeantech.com/chart/746-3309/
- GDPR, the Online Harms bill, Digital Markets Unit, Age Appropriate Design Code, Digital Services Tax, National Security & Investment bill
- Based on Global 2020 - The World’s Largest Public Companies, Forbes
- https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/707072/strength-and-opportunity-2017-bioscience-technology.pdf
- https://blog.google/technology/ai/machine-learning-can-boost-value-wind-energy/
- https://www.nature.com/articles/s41467-019-14108-y
- https://www.x.company/projects/mineral/
- https://deepmind.com/blog/article/alphafold-a-solution-to-a-50-year-old-grand-challenge-in-biology
- https://www.pwc.co.uk/press-room/press-releases/artificial-intelligence-could-add-232bn-to-UK-gdp.html
- https://www.copenhageneconomics.com/dyn/resources/Publication/publicationPDF/0/500/1569061077/copenhagen-economics-google-european-dcs-infrastructures-impact-study_september2019.pdf
- This is a conservative estimate based on The Conference Board’s estimate of the contribution of ICT capital. In reality, ICT also has a significant impact through TFP.
- https://www.bankofengland.co.uk/-/media/boe/files/speech/2017/productivity-puzzles.pdf?la=en&hash=708C7CFD5E8417000655BA4AA0E0E873D98A18DE
- Homeworking in the UK: Before and During the 2020 Lockdown, Alan Felstead and Darja Reuschke, 2020
- https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j4mc/drsi
- https://www.recruitmentandrecovery.co.uk/
- Public First estimate
- https://industrialstrategycouncil.org/sites/default/files/UK%20Skills%20Mismatch%202030%20-%20Research%20Paper.pdf
- https://awsimpactreport.publicfirst.co.uk/#c3_1
- https://technation.io/insights/diversity-and-inclusion-in-uk-tech-companies/
- https://www.inclusivetechalliance.co.uk/wp-content/uploads/2019/07/Inclusive-Tech-Alliance-Report.pdf