The threat of Google withdrawing from Australia is becoming increasingly real, following intensifying pressure over the draft News Media Bargaining Code (NMBC). This new legislation would force Google and Facebook to pay major players in the Newspaper Publishing industry for their journalism content. Google is the dominant player in the Online Advertising industry, accounting for over 40% of the market.
‘One source of concern for Google is that the NMBC creates a precedent, potentially spurring regulation in larger markets such as the United States. In its current form, the legislation would fundamentally alter the principles on which Google Search currently operates,’ said IBISWorld Senior Industry Analyst Liam Harrison.
Industries at risk
Amid this threat, Google may opt to exit Australia entirely rather than compromise the functionality of its products. Google Search withdrawing from Australia could be devastating for the tens of thousands of small and medium-size enterprises that rely on Google for visibility to attract consumers as part of their daily business operations.
‘Google products including Search and Maps are a crucial channel for small businesses to connect with target customers. Google’s exit would disrupt numerous Australian industries, which are already in a weakened state due to the COVID-19 pandemic,’ said Mr Harrison.
Industries that include many small and medium-size businesses, such as the Cafes and Coffee Shops industry and the Restaurants industry, are at particularly high risk from a potential Google exit. These businesses often rely on Google to display targeted ads that attract local customers. Hospitality enterprises have already faced significant hardship during the COVID-19 pandemic, with revenue expected to decline by 3.1% for cafes, and 15.0% for restaurants in 2019-20. Although these industries are anticipated to grow at a rate of 6.3% and 5.0%, respectively, in the coming year, Google’s withdrawal from the market could heavily jeopardise this growth.
A withdrawal of Google Search could significantly reduce small businesses’ ability to rebuild their customer base during a critical recovery period, resulting in potential business collapses and job losses.
‘Restaurants may also find themselves at the mercy of online ordering platforms such as Uber Eats and Menulog in the event of a Google exit. These businesses may struggle to act independently of these platforms, further exacerbating the power imbalance between online delivery platforms and restaurants,’ said Mr Harrison.
Other industries that would likely be affected include domestic tourism operators in the Caravan Parks, Holiday Houses and Other Accommodation industry, and personal service industries such as the Hairdressing and Beauty Services industry.
‘A lack of visibility on Google can be an economic death sentence for small businesses, as Google Search is often a key way to attract customers outside the immediate local area and can represent one of the strongest avenues for growth,’ said Mr Harrison.
The cost of transitioning away from Google
Although other search engines such as Bing could potentially fill the gap in the event of a Google withdrawal, this process would not be seamless. Businesses have already invested significantly in optimising their advertisements and visibility on Google. While a transition to alternative search engines would benefit search engine optimisers in the Web Design Services industry, it would represent a significant additional operational cost for smaller businesses. Web design services are expected to generate $1.1 billion in revenue in 2020-21, of which 13.2% is attributable to search engine optimisation.
Microsoft, the owner of the Bing search engine, has agreed that it would abide by the NMBC if it became the new dominant search provider in the wake of a Google exit, easing fears that the NMBC may cause other search engines to exit. However, a mass shift towards Bing would take time and resources that businesses would be hesitant to invest without long-term assurances that Google’s exit from the market would be permanent.
Weak position for regulators
Google exiting Australia may result in demand for proxy websites, which host a portal to Google Search from other countries to bypass restrictions placed on Australian users.
‘If Google were to withdraw from Australia, many Australians would likely adapt and switch to alternative search engines such as Bing or DuckDuckGo. However, a grey market for Google Search would potentially undermine efforts to implement the NMBC,’ said Mr Harrison.
Technological loop holes could enable Google to remain the dominant search engine in Australia, despite officially withdrawing from the country. In this scenario, Google would remain immune from the NMBC, weakening the new legislation’s regulatory power.
IBISWorld reports used to develop this release:
- Newspaper Publishing in Australia
- Online Advertising in Australia
- Cafes and Coffee Shops in Australia
- Restaurants in Australia
- Caravan Parks, Holiday Houses and Other Accommodation in Australia
- Hairdressing and Beauty Services in Australia
- Web Design Services in Australia
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647
Email: mediarelations@ibisworld.com
