Google Searches As Investment Guide?

logo_us.gifOver at TechCrunch, MG Siegler writes about a new tool in Google Finance called “Google Domestic Trends“:

Basically, it allows you to look at various sectors of the U.S. economy based on how they are performing in Google’s search index. The idea is that the volume of searches for related queries to a specific segment “may provide unique economic insight,” says Google.

Or may not. The example Siegler cites, retail sales, offers mixed results. If you compare actual retail sales from January 2008 through May 2009 to predicted retail sales:

The results predicted with the Google Retail Index (GRI) are clearly closer than the predictions made without it. For a while it looks like the data is only marginally closer, but starting in 2009, it’s clear that the data is much closer to the actual results.

True. But as an investor, I’d wonder not only why the Google Retail Index has been much closer to actual sales in 2009, but whether this trend will last. After all, for most of 2008 the difference between GRI and non-GRI forecasts was negligible. I’d want to see more data.

Fortunately, Google is more than prepared to serve up all the data we want. It’s up to us to make sense of it.

Google Domestic Trends provides interactive charts for 23 different economic sectors and allows you to compare each sector’s trendline (going back to 2004) to the Dow, S&P 500 and Nasdaq.

Here’s the trendline for queries related to advertising and marketing. Yes, it’s dismal, as anyone in media would expect. But queries jumped dramatically starting Aug. 22 and still were climbing through Aug. 29. Harbinger of a turnaround? We’ll see.

Google has another tool that journalists and researchers should love. It’s called Google Insights for Search. It allows you to see within a topic category the top search terms overall as well as the fastest-rising. It also allows you to filter the data by geography and date as well as subject. It’s a metrics junkie’s dream.