Small business would be one of the hardest hit sectors if Google were to entirely withdraw from Australia, according to industry market research firm, IBISWorld, following increasing pressure over the draft News Media Bargaining Code (NMBC).
The new legislation would force Google to pay major players in the newspaper publishing industry for their journalism content and in turn, fundamentally alter the principles on which Google Search currently operates.
“Amid this threat, Google may opt to exit Australia entirely rather than compromise product functionality. Google Search withdrawing from Australia could be devastating for small and medium-size enterprises that rely on Google for visibility to attract consumers,” IBISWorld senior industry analyst, Liam Harrison said.
“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 pandemic.”
Cafes and restaurants are among those at high risk as they often rely on Google to display targeted ads that attract customers. IBISWorld predicts the cafe and restaurant sector to grow at a rate of 6.3% and 5%, respectively in the coming year, but Google’s withdrawal could jeopardise this growth.
“Restaurants may 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,” Harrison said.
Domestic tourism operators are another industry likely to be affected, such as caravan parks, holiday houses and other accommodation, as well as personal services like hairdressers and beauty services.
“A lack of visibility on Google can be an economic death sentence for small businesses, as Google Search is often a key to attract customers outside the immediate local area and can represent one of the strongest avenues for growth.”
Although other search engines such as Bing could potentially fill the gap, businesses have already invested significantly in optimising their advertisements and visibility on Google. As a result, a transition to alternative search engines would represent a significant cost.
Owner of Bing search engine, Microsoft has agreed to abide by the NMBC if it became the dominant search provider. However, a mass shift towards Bing would take time and resources that businesses would be hesitant to invest without assurance that Google’s exit would be permanent, according to IBISWorld.
Another concern is the 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,” Harrison said.
“Technological loopholes 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.”
Melbourne music store generates 80% of revenue through Google
Ian Hammond, managing director of digital agency, Hamma Digital says that Google’s threat holds so much weight because there is a clear reliance on the service for SMEs.
“The revenue that Google derives from its paid advertising services is massive and the businesses utilising ads and paid search tools are benefitting too,” Hammond told Retailbiz.
A client of Hamma Digital, Melbourne music store, World of Music, generates 80% of its traffic from organic and paid search through Google.
“The issue goes beyond the paid ads. It’s the local business features that come into play and the alternatives to Google just don’t match up in that aspect.
“World of Music for example, who rely on the service to drive both online and foot traffic to their store, would be hit the hardest and there would be thousands out there in the same boat,” he added.