Google Australia details the economic value of news in Search amid licensing push

Back in April, Australia set out to force Google (and Facebook) to pay local publishers for content that appears in products like Search and News. An AU$600 million to $1 billion yearly payment has recently been suggested, with Google Australia today offering a rebuttal and explaining how its business works.

This move by Australia comes as the “transition to digital” has resulted in declining revenue for news publications. One solution gaining popularity around the world — including Europe — is to have big technology platforms “license and pay to display or provide full access to news content beyond simple snippets and links.”

Google starts by agreeing that “high-quality news has great social value,” but says there are “inaccurate claims about the economics” of Search linking to news articles, as well as its Google News aggregator. The AU$600 million (just under US$400 million) figure is “based on an assertion that news accounts for 10 percent of queries and generates about 10 percent of our gross revenues in Australia.”

In terms of what “direct economic value” Google gets from news content, it reiterates that there are no ads in Google News or Search’s “News” tab. The company last year did generate “approximately AU$10 million in revenue — not profit — from clicks on ads against possible news-related queries in Australia.”

Australian regulators recognize this point and argue that there is a big indirect value from services having news features. Google counters that this “indirect economic value” is “also very small,” with news-related searches accounting for just 1% of total lookups by Australians last year.

The ‘indirect value’ argument also overestimates the relevance of a small fraction of hard-to-monetize queries.

The bulk of our revenue comes not from news queries, but from queries with commercial intent, as when someone searches for ‘running shoes’ and then clicks on an ad.

Meanwhile, the company argues that it provides immense value to news websites. This includes how Search shows carousels and lists of articles even when people aren’t looking for news, which in turn leads to views, ad clicks, and possible subscriptions.

It also raises the point of how many of those views are international, with another of Google’s arguments being how it’s free to appear in Search and that websites have the ability to “control how they participate in Google Search.”

In 2018 Google Search accounted for 3.44 billion visits to large and small Australian news publishers for free. A study by Deloitte in Europe valued each visit between €0.04-0.06 or around AU$0.063—which equates to approximately AU$218 million in value going to Australian publishers each year from Google traffic alone.

Google ends by noting how it continues to work with the Australian Competition and Consumer Commission ahead of the expected draft of a mandatory code this July. According to the Sydney Morning Herald, the proposal could result in a collective licensing arrangement where media companies “work together on a set price for content in an attempt to receive better commercial terms.” What becomes of this case could impact how the rest of the world handles tech giants.

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