Google is on skinny ice in Australia. It ought to rethink its stance
The main problem is that there are two companies, Google and Facebook, which together are stifling our local media sector and profiting at the expense of Australian businesses.
The US is Australia’s closest ally and the Australian government has been extremely accommodating and held extensive consultations with various stakeholders, including Google CEO Sundar Pichai, to obtain fair and unbiased feedback. The Senate committee has been discussing media diversification more rigorously lately, and the competition watchdog, the Australian Competition and Consumer Commission, has confirmed that Google does indeed have a monopoly on the search market in Australia.
With the advancement of technology in the world, those who own the busiest websites are in control of the digital advertising space and, by and large, have immense power. Google cleverly acquired every part of the media supply chain to enrich the collection and compilation of large amounts of data (e.g., building facial recognition databases using public data and fitness data through its recent acquisition of Fitbit).
This gives it a remarkable advantage and market power over its competitors. The previous lack of competition and transparency in Australia has made the country an easy brand for Google, and the company certainly needs to acknowledge this, if only privately.
The company’s problems are not confined to Australia. In the United States, Google is facing numerous legal disputes over antitrust concerns related to its monopoly on search and search advertising. A similar story is playing out in Europe, Asia and South America. Google is also facing numerous antitrust lawsuits internationally. Should it lose its lucrative Australian business, it would not have many alternatives to make up for that loss.
Additionally, the new Biden administration is likely to raise corporate tax rates by adopting a tougher stance on Big Tech, which further increases Google’s vulnerability. Unsurprisingly, Google’s apparent regression in speaking to Prime Minister Scott Morrison last week is a clear sign of its weakness. Options are running out to thrive elsewhere.
It is very unlikely that Google will say goodbye to Australia.
Nevertheless, Google and Facebook have declared the code for media negotiations to be impractical and have launched a public relations offensive in recent months to thwart the proposal. They mistakenly believed they could influence the Australians or punish them in any way. There are competitors like Microsoft eager to fill in the loopholes left by Google. In fact, the likely outcome of this saga is a war between Microsoft Bing and Alphabet Google that has the potential to replace Google altogether.
It would be a painful, short-term disorder, but that is a small price to pay for a long-term sustainable solution for Australia. Big Tech may not have done itself a favor on the media code battlefield by flexing its muscles. Google and other social media giants should pay for media content generated in Australia that they provide in search results and news feeds on a daily basis.
Our government has to do a balancing act: to revise the media code so that it is objectively fair and transparent for both foreign media giants and Australian media journalism.
Instead of arguing any further, Google should negotiate with the Australian government and be grateful for the easy trip it has had in the past. Australia has been way too lenient and generous to overseas investors over the past few decades, and it is time to protect its national interest and diversify its search engine and media exposure to more than one dominant provider.
International investors need to recognize the intangible value they will gain by operating in Australia due to the growing population and economic and legal stability. The freeride age of media platforms like Google and Facebook must come to an end, and news publishers must be fairly compensated.
Dr. Shumi Akhtar is an Associate Professor in Finance at the University of Sydney Business School.
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