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News Analysis 26 Jan 2021 - 5 min read

Ad execs say Australia can handle a Google exit with Apple, Microsoft and even Yahoo set to gain

By Brendan Coyne - Editor

Some adland leaders say Google may have kicked an own-goal

By making very public threats to pull search from Australia, senior ad industry execs think Google has kicked an early own goal. They say regulation is inevitable and that far bigger battles lie ahead. Even if Google takes the nuclear option, the marketing industry and Australia’s broader economy will survive the fallout – and in the long run may even benefit.

What you need to know:
  • Google’s public threats to pull search to avoid the current news bargaining code give the government little option but to double down.
  • Senior agency and media execs believe Google may now have to follow through, at least partially, but think “scorched earth” is unlikely.
  • At worst, they say marketers, agencies and the public would adapt and Microsoft would gain – maybe even Apple and Yahoo would instead provide search in Australia. But the short term impacts would be painful.
  • Most think the bargaining code is a sideshow to the main events – and that regulation, globally and locally, is inevitable.
  • It’s not about the money for news, it’s about the data. 

The Australian government is not going to capitulate and I would be genuinely surprised if Google withdraws from the Australian market. It would be an own goal.

Joshua Lowcock, Chief Digital Officer and Global Brand Safety Officer, UM

Gunboat diplomat

Some commentators sympathise with Google’s reluctance to set a regulatory and commercial precedent. Others say the bargaining code is against the principles of the free internet. But Joshua Lowcock, the New York-based Chief Digital Officer and Global Brand Safety Officer at IPG Mediabrands network UM, thinks gunboat diplomacy risks starting an unwinnable war as governments globally step up efforts to regulate algorithms.

“My observation is if Google exits Australia for search or tries bullyboy tactics to get its own way, regulators will see that as a precedent as well. And they will respond accordingly.”

Moreover, he says pulling search “would simply demonstrate they have too much market power. It would just fuel the fire. I can’t see why Google would even contemplate openly threatening that approach. It seems ill thought-out.”

While framing the threat as a last resort, Google states it has “no real choice” but to give up the lion’s share of its $4.8bn Australian takings if the current code becomes law.

The company says it cannot comment further, but Mi3 understands that its “worst case” scenario does not currently extend beyond pulling search, with other services, such as Youtube where publishers also post news, not captured by the code.

But UM’s Lowcock thinks Google’s broader services may suffer considerable impairment, given the data feedstock search provides.

“I just I can't see them going scorched earth on search, because it may then have to be a wholesale exit,” says Lowcock.

“The Australian government is not going to capitulate on this and I would be genuinely surprised if Google withdraws from the Australian market. It would be an own goal,” he adds. “The more likely outcome is Google might remove the news tab and adjust the way it surfaces news snippets.”

Should Google go nuclear, Lowcock thinks others – Bing, or even privacy-friendly DuckDuckGo – could eventually fill the yawning gap. He suggests that might ultimately solve the bigger problem, “Which is not just search, but adserving, analytics, Android, Chrome, Youtube … where they predominately try and default to their own services in everything they do”.

Ultimately, says Lowcock, the platforms’ almost total market power is what regulators must address. Should regulators fail, he thinks we will all end up working for Facebook, Google or their subsidiaries.

It is now very difficult for the government to compromise and be seen to be giving in to the demands of an overseas giant ... It's likely Google must now carry out at least some aspect of what it has threatened to do.

Dan Stinton, Managing Director, Guardian Australia

Life finds a way

Omnicom Media Group Chief Investment Officer, Kristiaan Kroon, agrees that Google scrapping its Australian search business seems unlikely. But if it did, the ad industry – and Australian citizens and businesses – would adjust.

“Ultimately, advertisers follow audiences. If the product set changes, the audience doesn’t stop wanting that product, they just find another provider. Australians wouldn't stop searching, they would simply shift to other services.”

The marketing industry, he says, would survive the fallout.

“We are very adept at changing. We have become used to significant disruption at a very regular cadence. This would be a very, very big one, and we can’t pretend otherwise. But ultimately there are other providers. We do a lot of business in the US with all service providers; we would adapt.”

Kroon agrees the bargaining code is the undercard to more significant duels. Asked if 2021 might be the year of regulation, Kroon suggests the decade of regulation is more likely, globally and locally.

“This is a very slow burn. We’ve got 15 of these [ACCC recommendations] to work through in Australia alone. We are only just getting started on what are multipoint negotiations at a grand scale, in public. If you look at what is to come, it will have significant impact on both Google and Facebook’s businesses. So they have to get that power balance right,” says Kroon.

“Do I think Google has shot itself in the foot? Not yet. But if there is no compromise, then you have backed yourself into a corner.”

We have become used to significant disruption at a very regular cadence. This would be a very, very big one, and we can’t pretend otherwise. But ultimately there are other providers. We would adapt.

Kristiaan Kroon, Chief Investment Officer, Omnicom Media Group

Who blinks?

Kroon thinks the draft bill indicated readiness from policymakers to cede ground. “They have made significant movements around what is considered a news publisher [and therefore who qualifies for payments from the platforms], so government has shown a willingness to compromise.”

Ultimately, says Kroon, it comes down to whether either side overplays their hand. “If they do, the worst case scenario becomes possible.”

Guardian Australia Managing Director, Dan Stinton, thinks Google’s public ultimatum nudges the needle in that direction.

“It is now very difficult for the government to make compromises, because they will be seen to be giving in to the demands of an overseas giant,” Stinton suggests.

Should the platform seek to maintain credibility and engage with the upcoming adtech inquiry and attorney general’s privacy review, “it is likely that Google must now carry out at least some aspect of what it has threatened to do,” says Stinton.

It could be that the platform is genuinely intent on making a technical, social and economic test case to shape its approach in larger markets. In which case, there may yet be some local fallout. But change always brings opportunity.

There’s been a lot of talk around Apple's increased activity indexing the internet in recent months. Would it use Google moving out of Australia as a way to enter a market, improve its technology and subsequently roll out globally?

Gary Nissim, Managing Director, Indago Digital

Would Apple bite?

Gary Nissim, Managing Director at Sydney performance agency Indago Digital, thinks other big tech firms would relish Google making good on its threat.

“There’s been a lot of talk around Apple's increased activity indexing the internet in recent months. Would it use Google moving out of Australia – often seen as a test bed for larger English speaking markets – as a way to enter a market, build learnings, improve its technology and subsequently roll out globally?”

While Bing would have the clearest path, Nissim thinks even Yahoo could be tempted to get back together with Microsoft in Australia (they split in 2013 when Bing was dumped for Google) should the opportunity arise, or even go it alone.

Whatever the carve-up, he says clients would benefit.

“We all love Google from a tech perspective. But as with any monopoly they have no need to provide a platinum service and the so the industry suffers. We have no other options. We have to sing from their hymn sheet. Competition would be a very healthy alternative.

“As a search marketeer who loves the medium, I say bring it on.”

It is not payment for links and snippets. It is for consumer data that they use to power their digital advertising businesses – for which we receive exactly zero compensation.

Dan Stinton, Managing Director, Guardian Australia

Data, power and money

Yet Nissim thinks publishers get plenty of traffic from the digital duopoly, which they monetise through advertising. He questions the need for the code.

My personal view is that if the local media companies are concerned about how Google is using their content to help push its own agenda and drive its own revenue, they should de-index themselves from the search engine – a process that takes minutes.”

Guardian Australia’s Dan Stinton says that view misses the bigger picture – which is that the platforms feed off news content and collect data through social sharing tools on every page and through their ad ecosystems, which they use to generate further ad revenue, becoming monopolies in the process, taking all the ad dollars and controlling who sees what.

“Arguing [as the platforms have] that this is payment for links and snippets is not accurate,” says Stinton. “What the ACCC found is Google and Facebook have 81% share of the digital advertising market, and yet effectively control the digital economy and where people go online. It is because of that control that they are able to use publisher content, and data obtained from publisher content for their benefit, without any compensation to the publisher themselves.

“If they did not have complete control of where people go online, then we would be able to negotiate a better outcome. But it is not payment for links and snippets. It is for consumer data that they use to power their digital advertising businesses – for which we receive exactly zero compensation.”

That looks set to change, unless the platforms either make good on their threats, back down, or buy enough time to develop globally applicable workarounds.

The world is watching.

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Brendan Coyne

Editor

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