Jessica Goodfellow
Jun 2, 2020

Google mounts Australia legislation defence, says economic value of news is 'very small'

Google's Australia head calls out 'inaccurate claims' about the value of news content to the search giant's bottom line.

Google mounts Australia legislation defence, says economic value of news is 'very small'

Google has launched a staunch defence of the value exchange it currently provides to the Australian news industry, in response to the government's plans to introduce "world-first" legislation that could force it to share ad revenue with publishers.

The Australian government asked the Australian Competition and Consumer Commission (ACCC) to prepare a mandatory code of conduct addressing the "power imbalance" between tech giants, such as Google and Facebook, and the news industry, in April. At the time, it said "no meaningful progress" had been made on voluntary discussions about the value exchange of news carried by tech companies.

Google and Facebook both released statements at the time, in which they expressed "disappointment" at the government's move, and talked up their "collaborative" approach to news and the existing support they provide the industry.

Since the government first announced the plans for the mandatory code, the chairman of one of Australia's biggest media companies, Nine Entertainment, argued that the tech giants should pay 10% of their advertising revenue in Australia—estimated by the government at some AU$6 billion (US$3.9 billion) per year—to the news industry. The figure came from the ACCC's report, which determined that 10% of the tech firms' revenues came from advertising on news content.

On Sunday (May 31), Google Australia managing director and VP Mel Silva called these figures "inaccurate", and said "it’s important that we have a discussion based on facts".

In a blog post entitled, 'A fact-based discussion about news online', Silva said that Google generated approximately AU$10 million in revenue from ads on news content. With this in mind, she said the direct economic value Google gets from news content in search is "very small". 

"We don’t run ads on Google News or the news results tab on Google Search. And looking at our overall business, Google last year generated approximately AU$10 million in revenue—not profit—from clicks on ads against possible news-related queries in Australia. The bulk of our revenue comes not from news queries, but from queries with commercial intent, as when someone searches for 'running shoes' and then clicks on an ad," Silva said.

Meanwhile, she said the indirect economic value Google gets from news in search is "also very small", with news-related queries accounting for just over 1% of total queries on Google Search in Australia in the last year. 

"The ‘indirect value’ argument also overestimates the relevance of a small fraction of hard-to-monetise queries and fails to consider that 'indirect value' cuts both ways—Google Search encourages lots of traffic to news publishers from users who weren’t originally looking for news content at all. As an example, a search for 'Melbourne' would return results like tourism links, maps, local government information, news headlines, and more," Silva wrote.

She went on to talk about the "substantial two-way value exchange" that Google already provides the industry—by giving them a platform to reach more readers, and convert those readers into ad revenue. In fact, Google calculated that Google traffic to Australian publishers each year equates to approximately AU$218 million in value. 

"In summary, news media businesses are likely to derive far more cross-content benefit than they generate," she wrote.

Finally, she claimed that the value of news to Google "isn’t about economics" but is about its role in educating and informing Australians and strengthening democracy. 

"We recognise the importance of news and are committed to finding new ways to support publishers," she concluded. "The mandatory code will have important consequences for Australians, including how and which types of news they can search and discover through Google. As we work with the ACCC and Government, as well as with media companies to build out new solutions to derive additional revenue, it’s important to base decisions on facts, not inaccurate numbers and unfounded assertions." 

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