Can Google Trends improve the marble demand model: A case study of USA's marble demand from Turkey

Highlights

• The USA is the world's largest worked marble importer.

• Google Trends used for measuring popularity of the “Turkish Marble”.

• Effects of GDP per Capita, Price, Parity & Trends on marble demand were investigated.

• The selected variables provided an efficient marble demand model.

• The “Google Trends” improved the model.

Abstract

The United States is the second largest mineral importer from Turkey and marble is the most imported mineral commodity. Therefore, understanding the demand function of marble is an important subject for countries such as Turkey. Marble's end-use by individuals and households distinguishes it from other mineral commodities. Like other end-use products, trends and popularity are important factors in determining the demand for marble. The United States' preference for single-family homes, and the customization of these homes by households, increases the importance of the marble. Demand studies in the field of mineral commodities have thus far only focused on demand factors such as GDP per capita. However, they have overlooked the effect of the “trends”. To determine the effect of trends on marble demand, a base model was developed using parity, GDP per capita, and price. The base model was statistically significant and had a relatively high explanatory power (R² = 0.85). A second model was developed to include the trends variable, obtained from Google Trends. The addition of trends improved the analysis indicators of the base model (R² = 0.90). This study aims to put forth the effect of “trends” on the marble demand. The presented findings of this paper add to our previously limited understanding of trends and popularity on mineral commodities.

Introduction

In order to increase living standards, consuming materials from the environment is necessary. (Schoer et al., 2012). Therefore, modern societies rely on obtaining materials and energy from minerals, and the need for minerals and energy increases proportionally by the growth rate of populations and economies. Governments respond to this demand by increasing both domestic production and international trade. However, due to the nature of the earth's geology, mineral-energy resources are allocated unevenly; while some countries can mine and export certain minerals, others cannot and therefore they rely on imports. Even though the US is considered a rich country in terms of mineral and energy resources, in the case of the marble the US actually has limited natural supply. When this limited natural supply combines with the US's enormous population and high level of income, domestic resources and production do not meet the demand. Therefore, the US imports approximately $1B of marble from natural stone abundant countries such as Italy, China, and Turkey; with shares respectively 30%, 26%, and 23% (OEC, 2017).

Turkey's geology is very complex and rich with mineral diversity and reserves. As a result of this wealth, Turkey exports many types of ores and minerals, both processed and raw. The best-known ones are marble - travertine (raw, crude, dimensioned, and slab), boron concentrates and products, pumice, chromite, and ferrochromium. In the last two decades, the United States' mineral imports from Turkey quadrupled from $100 M to $391 M. In fact, until China's take overtook them in 2007, the US was the leading importer of Turkey's mineral output (IMIB, 2019). The main mineral trade commodity between the US and Turkey is marble, which is responsible for 75% of the US mineral import from Turkey by value. Therefore, it is very important to understand the structure of the marble market and the dynamics behind it.

From 2002 to 2018, the volume of mineral exports in Turkey tripled. As mentioned earlier, marble products are the main component of this trade. However, after 2009 other products, such as ferrochrome and borates, gained volume in the international trade. The historical change in Turkey's mineral exports to the US is shown in Graph 1.

A majority of Americans live in single-family houses. Americans commonly live in suburbs in detached family houses rather than apartments in residential complexes or high-rise buildings concentrated in city centers. In 2017, 69% of the 122 million U.S. households were living in single-family houses (University of Michigan CSS, 2020; US Cencus Bureau, 2019). Unlike predesigned monotype flats, households tend to choose the interior design options they prefer in detached-family houses. Marble is used mostly in kitchens, bathrooms, flooring, siding, and for decorative or ornamental purposes. However, marble is usually not a default construction product, but instead is a high-end product that depends on both the customer's willingness to pay and their preferences. Thus, the popularity of marble, which is hard to objectively measure, is one of the most important parameters in its demand.

Google is the most well-known and universally used search engine throughout the world, controlling 92% of the search engine market (Statcounter, 2020). Like many of Google services, Trends is a widely used to obtain information and data on internet searches for statistical purposes. Google Trends utilizes relevant search data for forecasting topics such as the unemployment rate, the volatility of stocks, and seasonal influenza outbreaks for a variety of sectors (i.e., health, marketing, tourism, etc.). However, Google Trends usage for research on mineral resources is very limited.

Google Trends is a service that shows the frequency of worldwide searches for a specific time period or time interval. The scope of Google Trends data is so broad that the data can be used in almost any area. Researchers have been using Google Trends to study a variety of topics; for example, the economy (Nagao et al., 2019), tourism (Bokelmann and Lessmann, 2019; Song et al., 2003), medical issues (Kamiński et al., 2020; Luze et al., 2020), energy (Park and Kim, 2018), and commodities (Aharon and Qadan, 2018; Baur and Dimpfl, 2016; Jain and Biswal, 2019; Lu et al., 2020; Salisu et al., 2020). As can be seen from these studies, Google Trends is a versatile and reliable data source that can help to measure trends, tendencies, and popularity.

This paper has two key aims. Firstly, determining the effect of trends on marble demand in the US on Turkey, using universal determinants such as price, income, and parity. In order to investigate this, a base model was developed by using parity, GDP per capita, and price. Then, a second model was constructed by including the trends variable obtained from Google Trends. The other aim of the study is determining whether Google Trends can be used as a tool to measure “popularity”.