New Analysis: Google’s assessment of Google vastly overstated

New Australia Institute analysis shows Google’s estimates of its economic importance to Australia are vastly overstated, and Google’s claims to generate benefits of $39 billion for businesses and $14 billion for consumers do not withstand even the most basic scrutiny. Nevertheless, the tech giant uses those figures to claim it is as important to the Australian economy as the construction industry.

Google’s claims were set out in a self-commissioned report Google’s Economic Impact in Australia, and cited in evidence to the Senate Inquiry into the Media Bargaining Code, which is due to report on Friday 12 February. 

Key findings:

  • In estimating the benefits of Google, Google’s consultants compare an Australia with Google with one without Google and in which nothing replaces it. In reality, these competitors exist and would quickly provide similar services to Google.
  • For example, Google estimates $5.1 billion in time savings to consumers due to its search product by comparing an online search to the time taken to conduct “a search at the library.” Without Google its users would be spending 4.9 days a year at the library according to the report. This ignores the decades-long existence of other search engines, let alone modern online libraries.
  • The claimed benefits to business are measured as the additional sales from advertisers that use Google. Advertising is just another intermediate input into production and the comparison should be not with the absence of advertising (which the report admits it does) but with the next best alternative. Google’s approach is like the leather producers claiming they are responsible for all luxury cars that have leather seats.
  • Even so, the benefit to Australia, if any, is any additional revenue less additional costs and that should be compared with the next best alternative . A bar may get additional sales from advertising on Google but it also has to buy additional stock and put on additional staff.
  • The report has nothing to say on the economic downsides of Google’s monopoly power or the privacy issues at the core of big tech companies.
  • The report makes other curious claims such as 97 percent of its ‘benefits’ (i.e.  customer usage) comes from outside the technology sector. If, for instance, it was found out that 97 percent of purchases of fish and chips came from outside the fish and chip sector would anyone be surprised, or even care?

"Our analysis shows that Google is stretching the truth in its effort to push back against regulation in support of fact-based journalism and the news media,” said Peter Lewis, director of the Australia Institute’s Centre for Responsible Technology.

"It follows on from its hyperbolic claims the News Bargaining Code would 'break the internet' and crude threats to close search in Australia if it doesn’t get its way.

"No-one denies that Google's innovations have provided benefits to Australians, but their market dominance has also come at a cost -- not just the 5,000 journalism jobs that have disappeared in the past decade, but in the rise of diversion and discord that their advertising business model promotes.

“Rather than over-egging its economic contribution it would be great to see Google reflecting on its social impact and embracing rather than resisting the ACCC's program of democratic digital platform reform."

The new Australia Institute analysis, Google’s assessment of Google, by David Richardson, senior research fellow at the Australia Institute can be downloaded here.