Google Australia pays pitifully tiny tax for its size – just $100 million last year despite booking $4.8 billion locally in advertising revenue. Yet now Google claims that its value to Australia is more than $50 billion and it is responsible for 280,000 jobs although it merely employs 1800 people. In an excoriating paper, a senior research fellow at the Australia Institute, David Richardson, has torn apart Google Australia for vastly overstating the importance of Google Australia.
In the leadup to the fight over the news bargaining code Google presented a submission to the Senate Committee. Google, attempting to fend off the new laws, outlined its critical importance to Australia’s operations. The submission drew on a consultancy report commissioned by Google and prepared by consulting firm AlphaBeta (2021).
Google’s claims are utterly misleading. This article is based on a paper written by The Australia Institute’s senior research fellow David Richardson, called “Google’s assessment of Google”.
Google claims that it creates $14 billion of benefit for consumers and some $39 billion of benefit for business. “Net advertising benefits for advertisers” is estimated at $31.7 billion, with employee searches, Google Maps, Google Play, AdSense, and Ad Grants bringing the total to $39 billion. That’s an extraordinary amount of money.
It is no small irony that during the argy-bargy that preceded Google paying money to select media such as News Corp, Nine, Guardian and Seven Media, its corporate assailants had also made ludicrous claims. News Corp reckoned Google owed it $1 billion and Peter Costello at Nine said Google should pay Nine $500 million.
Moreover, the central contention of the old media publishers – that Google and Facebook stole their content – was entirely false. In fact, Google and Facebook effectively advertised for them for free, showcasing small excerpts and links to their paywalled websites.
Still, a closer look illuminates that Google relied on dubious and ultimately disingenuous assumptions to arrive at these numbers.
First, the report assumes that if Google were not in Australia, there would be nothing in its place. As Richardson notes, this is completely unrealistic.
Bing, DuckDuckGo and Ecosia – while not used as ubiquitously as Google – are attracting more users every day.
Tucked away in the methodology section of the report is the sentence that admits to this sleight of hand:
“These benefits also do not account for activity that may have been displaced by Google, nor attempt to estimate the incremental impact of Google on the Australian economy beyond what would be the case if Google didn’t exist but other companies like it did.”
As Richardson notes:
“It admits that it has not really examined the benefits of Google itself but what Australia would look like if Google was not there and nothing replaced it.”
The fact is that other search engines do exist. Note how quickly Microsoft, owners of Bing, swooped in to claim they could replace Google.
Report is worthless
“The quote is a very honest admission which, of course, means most of the report should be discarded.”
But let us continue anyway.
Google’s submission claims that “Google supports AU$39 billion in benefits to businesses in Australia.”
Evidence by Melanie Silva, managing director and Vice President of Google Australia and New Zealand, paints a different picture.
In front of a Senate Inquiry, where giving false or misleading evidence is considered contempt of parliament and carries the potential penalties of a jail term or substantial fines, Silva suggested that Google generated revenues of just $4.8 billion (Silva 2021 p 4). This represents just one eighth of the claim made in the AlphaBeta report.
Google responsible for 280,000 jobs!
Google also claims that its 1,800 employees create a massive 116,200 direct jobs and 162,700 indirect jobs; some 280,000 Australian jobs in total.
That is an incredible ratio of 155 Australian jobs for every one of Google employees. But as Richardson states, it would be laughable to suggest that if Google left Australia then some 280,000 jobs would disappear.
Richardson applied Google’s logic to compare it with the work done in June 2019 by the Reserve Bank of Australia. In its note printing facility, the RBA employed 69 people. Their work allows all the cash transactions in Australia to be made. According to Google’s logic, it could be claimed that the jobs of these 69 people support the 12.9 million people working in Australia. This is ludicrous.
Another example, Richardson notes, would be a steel producer claiming that the entire output of the car industry and cars relied on the steel industry. Or Australian leather producers claiming they support the full value of a new Mercedes Benz car because they provide the leather seats.
Again, laughable claims. As Richardson states, Google or anyone else might well say they support all Australian business, which, all up, happen to be worth almost $2 trillion
The report claims that the benefits of using Google Maps amount to $1.7 billion for businesses and $6.1 billion for consumers.
That’s quite some productivity savings for truck drivers travelling up and down the Hume Highway from Melbourne to Sydney and back again who supposedly “save” many days a year because of using Google Maps.
Again, these claims ignore access to similar GPS apps. The report, in its methodology section, claims to account for the use of GPS devices as an alternative to Google Maps. But it does not say how it values the difference in performance between Google Maps and other products.
The report states that “the average Australian user saves 4.9 days a year” by being able to use Google Search to find information.
Comparing Google to a manual search in a library does not seem an apt comparison.
As Richardson notes: “In the absence of Google, we certainly would not expect to see some 330,000 people in the nation’s libraries [on any given day] based on present population figures.”
Furthermore, if you were to seek assistance in a modern library, a librarian would help the you with an electronic search, sometimes with Google and sometimes with alternatives such as the National Library’s search engine.
No mention of the costs
Finally, there is not a single mention of any of the costs Google imposes on taxpayers.
To name just a few, these include:
- a business model that means people lose control over their personal information;
- the monopoly rents paid to Google;
- the costs to businesses when they are put down on the list of Google Search results;
- the lost tax revenue; and
- the lack of competition when Google buys up competitors.
The Australia Institute report is available here.
Editor’s Note: the TAI report does a great job of debunking Google’s exaggerations but this publication does not agree with TAI views on the Media Bargaining Code. As per the story below, the “contents payments” are effectively a subsidy for old media, “protection money” for media outlets friendly to the government. They could just tax the digital giants properly and put the funds into an independent body for public interest journalism.