Google has threatened to pull its search engine out of Australia. The threat came as the Australian parliament started pushing through new legislation called the Media Bargaining Code that could change the way Mountain View, Calif.-based Google and other tech companies that depend on digital advertising do business. The principle is straightforward enough. If passed in its current form, it will force Facebook and Google to pay Australian news businesses for content linked to, or featured on their platforms.
Digital Platform Power Imbalances
It is not the first such attempt to regulate the way content is used by both companies — there have been similar cases in Europe. In this case it goes back to last April when the Australian government asked the Australian Consumer and Competition Commission (the ACCC) to develop a mandatory code of conduct to address bargaining power imbalances between Australian news media businesses and digital platforms, specifically Google and Facebook.
A draft code for public consultation and a series of questions and answers (Q&As) about the draft code were published soon after. Following this, the Australian government pulled the recommendations made by the ACCC and other interested parties, into legislation that was finally introduced to parliament in a bill at the beginning of December 9th.
Microsoft’s Supports the News Bargaining Code
The response from Google was predictable. Last month, the search giant, threatened to pull its search engine from Australia.
The response from Microsoft was almost as predictable. Microsoft CEO Satya Nadella has already been touting the virtues of its search engine Bing and assured Australian legislators that it was a strong alternative to Google. A statement from Nadella and Brad Smith, Microsoft chief legal officer and president of the company, said they even went as far as supporting the bill:
“Microsoft fully supports the News Media Bargaining Code. The code reasonably attempts to address the bargaining power imbalance between digital platforms and Australian news businesses,” the statement reads. “It also recognises the important role search plays, not only to consumers but to the thousands of Australian small businesses that rely on search and advertising technology to fund and support their organizations.”
Furthermore, the statement added, the company will invest further to ensure Bing is comparable to our competitors. It will also enable Australian businesses to transfer their advertising to Bing. “Microsoft will ensure that small businesses who wish to transfer their advertising to Bing can do so simply and with no transfer costs. We recognize the important role search advertising plays to the more than two million small businesses in Australia,” it added.
Bing’s Unforeseen Opportunity
And there is the crux of it. If Google does decide to pull its search engine out of Australia, Microsoft will become the biggest search engine in Australia and reap all the benefits that brings.
Microsoft’s Bing could certainly use a little help in making up ground in Australia. According to StatCounter Google currently dominates the search engine market in the country with 94.5% of the share to Bing’s 3.6%, and DuckGoGo at 0.87%. Google also tops the browser space as well as the operating system space with Android 41.28% and Windows 31.6%. Psychologically, Australia is dominated by Google and short of Google pulling out of the market, it is likely to remain so for the foreseeable future.
Dave Nilsson is the founder and director of UK-based ConvertedClick, a digital marketing agency. He says it would not be too difficult for Bing to replace Google if it did pull out as, he said, it is easier and far more flexible than Google. He believes Bing is far better at image and video search. He also believes that the clarity, sharpness, and quality of images are far better of what you see on Google search and it also allows users to search for images in multiple formats like wide, tall, and square.
Similarly, Nilsson says, Bing’s video search is far superior to Google. It features a grid interface with video thumbnails and the best thing is you can play the videos without navigating to Youtube. “I think Bing can surely bank on these features to build a big user base regardless of whether Google exits or not,” he said.
Bing’s SERPs (Search Engine Results Page) also have less competition. “As a digital marketing expert, I recognize the importance of search engine rankings for online visibility and growth. Businesses can leverage the opportunity to build a dominating presence in a less competitive environment. Bing SEO might be the next big thing in Australia,” he added.
There are other issues too. Bing uses exact match domains to display search results. The same is not true for Google. Social media signals also play a major role in Bing’s algorithm. So, if your content is highly popular on social media channels, it will rank higher in search results. With growing social media use, this will be highly relevant.
Disruption in Google’s Business Model
This is not the first time Google has gone head-to-head with a national government to protect its business model. In Europe, Google was forced to strike a deal with a group of French publishers last month agreeing to a framework that will allow the search giant to negotiate individual licensing deals. Indeed, according to some reports, Google has already negotiated a few individual payment deals with some French news publishers such as daily paper Le Monde and magazine l’Obs.
Last week, in an interview with CNBC, the head of the ACCL said that Australia doesn’t want to see Google leave, but if the tech company decides to exit the country because it is unable to reach an agreement with the government, it has to be “their call.”
In a statement at the end of January about the findings of its interim report — the precursor to the preliminary report due to be published later this year the ACCL noted that competition and transparency in the digital advertising technology supply chain is impacting publishers, advertisers and consumers and needs to be addressed.
The report examined the digital display advertising market in Australia, which enabled the near instantaneous delivery of $3.4 billion of digital display advertising opportunities on news, entertainment and other websites and apps every year.
“There is a real lack of competition, choice and transparency in this industry. These issues add to the cost of advertising for businesses, which will ultimately impact the prices paid by consumers,” ACCC Chair Rod Sims said in the statement.
The report also noted that while there are many ad tech providers in Australia, Google is by far the largest provider of all the key ad tech services examined by the report and is the only provider across the full ad tech supply chain that also sells ad inventory. The ACCC estimates that Google’s share of the revenue or ads traded in each of the required services in Australia ranges from 50%-60% to between 90%-100%, depending on the service.
Google Is Open To Compromise
For its part, Google, in an open letter to Australians says that the ability to link freely between websites is fundamental to web search. It pointed out that the code creates an unreasonable and unmanageable financial and operational risk to its business. “The Code was originally designed to support the financial future of publishers — an important goal which we’ve committed to support. But the way it tries to achieve this would break the way Google Search works,” Mel Silva, managing director of Google Australia, explained in the letter.
She added: “The Code’s rules would dismantle a free and open service that has been built to serve everyone and replace it with one where links come at a price, and where the Government would give a handful of news businesses an advantage over everybody else.”
It is not clear how this is going to end, but it seems reasonable to assume that compromise position will be reached in the coming months in much the same way a compromise was reached in Europe. But if not, what then? It is impossible to say, but it it does seem likely that everyone will lose out.