New use for Google Adwords

A recent The Economist article points to a secondary use of the Google search words. According to Hyunyoung Choi, who works at Google, fluctuations in the frequency with which people search for certain words or phrases online can improve the accuracy of the econometric models used to predict, for example, retail-sales figures or house sales.

The advantage of using Google Trends is that one can forecast performance based on current data, and not on old, historical data. Although it doesn't work for all industries, Google Trends may provide useful paid services and thus become a new business area for Google. Currently, these data are available through a site called Google Trends, which allows anyone who cares to do so to download an index of the aggregate volume of searches for particular terms or categories.It is important to note, though, that it is critical which categories you choose, and how the categories move in the same direction and to the same extent to your company's products / services.

How widely could this idea be applied? For some things, like retail sales, the categories into which Google classifies its search-trend data correspond closely to what people may want to predict, such as the sales of a particular brand of car. For others, like sales of houses, things are less clear. It appears that searches for estate agents work better than those for home financing.

All in all, this new Google tool may prove to be more accurate than the internal strategy department's forecast, which is based on historical, old data already.

See the below charts for an example of Google Trends' use.