Tag: Google

Digital Platforms Inquiry Raises Significant Issues

The ACCC has released their preliminary report into Digital Platforms. A final report will be produced next year.

The issues raised are significant and far reaching, and questions the substantial market power players such as Google and Facebook have, the data they capture and monitise and their impact on the media. 94 per cent of online searches in Australia currently performed through Google.

Facebook and Instagram together obtain approximately 46 per cent of Australian display advertising revenue. No other website or application has a market share of more than five per cent.

They say there is a lack of transparency in the operation of Google and Facebook’s key algorithms, and the other factors influencing the display of results on Google’s search engine results page, and the surfacing of content on Facebook’s News feed.

Anti-competitive discrimination by digital platforms in favour of a related business has been found to exist in overseas cases. For example, in the European Commission’s 2017 decision, Google was found to have systematically given prominent placement to its own comparison shopping service (Google Shopping) and to have demoted rival comparison shopping services in its search results.

Monopoly or near monopoly businesses are often subject to specific regulation due to the risks of competitive harm. The risk of competitive harm increases when the monopoly business is vertically integrated. The ACCC considers that Google and Facebook each have substantial market power and each have activities across the digital advertising supply chain. Google in particular occupies a near monopoly position in online search and online search advertising, and has multiple related businesses offering advertising services.

This is their executive summary:

On 4 December 2017, the then Treasurer, the Hon Scott Morrison MP, directed the Australian Competition and Consumer Commission (the ACCC) to hold an inquiry into the impact of online search engines, social media and digital content aggregators (digital platforms) on competition in the media and advertising services markets. The ACCC was directed to look at the implications of these impacts for media content creators, advertisers and consumers and, in particular, to consider the impact on news and journalistic content.

Digital platforms offer innovative and popular services to consumers that have, in many cases, revolutionised the way consumers communicate with each other, access news and information and interact with business. Many of the services offered by digital platforms provide significant benefits
to both consumers and business; as demonstrated by their widespread and frequent use by many Australians and many Australian businesses.

The ACCC considers, however, that we are at a critical point in considering the impact of digital platforms on society. While the ACCC recognises their significant benefits to consumers and businesses, there are important questions to be asked about the role the global digital platforms play
in the supply of news and journalism in Australia, what responsibility they should hold as gateways to information and business, and the extent to which they should be accountable for their influence. In particular, this report identifies concerns with the ability and incentive of key digital platforms to favour their own business interests, through their market power and presence across multiple markets, the digital platforms’ impact on the ability of content creators to monetise their content, and the lack
of transparency in digital platforms’ operations for advertisers, media businesses and consumers.

Consumers’ awareness and understanding of the extensive amount of information about them collected by digital platforms, and their concerns regarding the privacy of their data, are also critical issues. There are also issues with the role of digital platforms in determining what news and information is accessed by Australians, how this information is provided, and its range and reliability.

Digital platforms are having a profound impact on Australian news media and advertising. The impact of digital platforms on the supply of news and journalism is particularly significant. News and journalism generate broad benefits for society through the production and dissemination of knowledge, the exposure of corruption, and holding governments and other decision makers to account.

It is important that governments and the public are aware of, and understand, the implications of the operation of these digital platforms, their business models and their market power.

The ACCC’s research and analysis to date has provided a valuable understanding of the markets that are the subject of this Inquiry, including information that has not previously been available, and has identified a number of issues that could, or should, be addressed. Many of these issues are complex.

The ACCC has decided that the best way to address these issues in the final report, due 3 June 2019, is to identify preliminary recommendations and areas for further analysis, and to engage with stakeholders on these potential proposals. Such engagement may result in considerable change from the ACCC’s current views, as expressed in this report.


Will The Digital Economy Be Taxed?

From The Conversation.

The government is reportedly considering a new tax on the digital economy. While no details of the tax are available yet, the digital services tax recently proposed by the European Commission may give us an idea what the tax might look like.

In essence, the proposal will impose a 3% tax on the turnover of large digital economy companies in the European Union. Similar ideas have been suggested in the UK and France.

The current international tax system was designed before internet was invented, so this new tax is a response to this problem. Under the current system, a foreign company will not be subject to income tax in Australia unless it has a significant physical presence in the country. The key word here is “physical”.

It is well known that modern multinationals such as Google can derive substantial revenue and profits from Australia without significant physical presence here. It is no surprise that this 20th-century tax principle struggles to deal with the 21st-century economy.

This problem is well known but the solution is far more elusive.

Attempts to tax digital companies

The best solution in response to the rise of the digital economy is to reword the laws to take more into account than the “physical” presence of a company in the international tax regime. However, this reform would require international consensus on a new set of rules to allocate the taxing rights on the profits of multinationals among different countries.

In particular, it would mean more taxing rights for source countries where the revenue is generated. The formidable political resistance is not difficult to imagine.

The OECD has attempted to address this fundamental issue, but in vain so far. Its report on the taxation of digital economy in the Base Erosion Profit Shifting project did not provide any recommendation to improve the system at all. The recent report on its continuing work on the digital economy again shows little progress.

While the EU also recognises that the long-term solution should be a major reform of the international tax regime, the slow progress of the OECD’s effort is seriously testing the patience of many countries. Therefore, the EU has proposed the digital services tax as an “interim” measure.

Google as an example

The Senate enquiry into corporate tax avoidance revealed that Google is deriving billions of dollars of revenue every year from Australia but has been paying very little tax. In particular, the revenue reported to the Australian Securities and Investments Commission in Australia in 2015 was less than A$500 million, with net profits of A$47 million.

The government responded by introducing the Multinational Anti-Avoidance Law in 2016, targeting the particular tax structures used by multinational enterprises such as Google.

Google Australia’s 2016 annual report states that the company has restructured its business. Though not stated explicitly, the restructure was most likely undertaken in response to the introduction of this law.

As a result of the restructure, both revenue and net profits of Google Australia increased by 2.2 times.

However, here is the bad news. Though Google has reported significantly more profits in Australia, the profit margins of the local company remain very low compared to its worldwide group. For example, the net profit margin of Google Australia was 9% while that of the group was 22%.

Of course, a business may have different profit margins in different countries for genuine commercial reasons. However, based on our understanding of the tax structures of these multinationals, it’s likely that significant amounts of profits are booked in low-tax or even zero-tax jurisdictions.

This example suggests that while the Multinational Anti-Avoidance Law is achieving its objectives, it alone is unlikely to be enough.

A digital services tax in Australia

The digital services tax is a turnover tax, not an income tax. This circumvents the restrictions imposed by the current international income tax regime.

The targets of this tax include income of large multinationals from providing advertising space (for example, Google), trading platforms (for example, eBay) and the transmission of data collected about users (for example, Facebook).

If Australia follows the model of the digital services tax, the new tax may generate substantial amount of revenue. For example, Google Australia’s revenue reported in its 2016 annual report was A$1.1 billion. A 3% tax on that amount would be A$33 million.

Along with the digital services tax proposal, the EU proposed the concept of “significant digital presence” as the long-term solution for the international tax system. The exact details are subject to further consultation. However, the relevant factors may include a company’s annual revenue from digital services, the number of users of such services, and the number of online contracts concluded on the platform.

The destiny of this proposal is unclear, but it’s likely to be subject to fierce debate among countries. In any case, the proposals of the digital services tax and the digital presence concept suggest there may be a paradigm shift in the thinking of tax policymakers in response to the challenges imposed by the digital economy that would be difficult, if not impossible, to resist.

Author: Antony Ting, Associate Professor, University of Sydney

Google’s ban on payday & high-interest loan ads going into effect

From Search Engine Land.

After a week’s delay, the ban on predatory lending ads for AdWords advertisers is beginning to roll out.

In May, Google announced that ads promoting payday loans that require repayment within 60 days and loans with interest rates above 35 percent would no longer be accepted or displayed starting July 13. Yet many people have noticed that payday loans are still showing up in Google search results, a week after the ban was supposed to start.

Payday-SearchGoogle’s execution of the ban was delayed, but it is now rolling out. The company posted an update to the ad policies in the AdWords help center covering personal loans, high-APR (annual percentage rate) and personal loans on Wednesday afternoon. Note, the policy on high-APR personal loans affects US advertisers only. The policy for short-term personal loans is global.

The policy includes the following reasons for ad disapproval:

Payday loans: “Personal loans which require repayment in full in 60 days or less from the date the loan is issued (we refer to these as ‘Short-term personal loans’). This policy applies to advertisers who offer loans directly, lead generators, and those who connect consumers with third-party lenders.”

High interest loans: “In the United States, we do not allow ads for personal loans where the Annual Percentage Rate (APR) is 36% or higher. Advertisers for personal loans in the United States must display their maximum APR, calculated consistently with the Truth in Lending Act (TILA).”

New ads for payday and high-interest loans are no longer being accepted, and Google will be removing existing ads from the system over the next several weeks. That process will take some time, as it’s likely Google will have to manually check the loan terms listed on advertiser websites before deciding whether to disapprove ads.

Google Bans PayDay Ads

Google said that from mid-July, it would no longer accept ads for loans where repayment is due within 60 days of the date of the issue, imposing a blanket ban across its ad systems to shield users from “deceptive or harmful” financial products. It will include ads for loans with an annual percentage rate of 36 per cent or higher in the US. The decision would not affect other financial products such as mortgages or credit cards. The payday loans will still be shown in search results. This is the first time Google has announced a global ban on ads for a broad category of financial products.

You can listen to the segment on ABC PM where we discussed this issue.

eMarketer says Google dominates the global digital advertising market, receiving a third of the $159bn in revenues in 2015. Facebook who is second with 11 per cent of the worldwide market, has already banned advertisements of payday loans or paycheck advances, making it harder for such loans to reach large online audiences.

Google already has bans on advertising of tobacco, recreational drugs, guns, ammunition, explosives and dangerous knives on its site. In 2015, they disabled over 780 million ads.

Here is the annoucement, made on Google’s blog.

When ads are good, they connect people to interesting, useful brands, businesses and products. Unfortunately, not all ads are–some are for fake or harmful products, or seek to mislead users about the businesses they represent. We have an extensive set of policies to keep bad ads out of our systems – in fact in 2015 alone, we disabled more than 780 million ads for reasons ranging from counterfeiting to phishing.

Ads for financial services are a particular area of vigilance given how core they are to people’s livelihood and well being. In that vein, today we’re sharing an update that will go into effect on July 13, 2016: we’re banning ads for payday loans and some related products from our ads systems. We will no longer allow ads for loans where repayment is due within 60 days of the date of issue. In the U.S., we are also banning ads for loans with an APR of 36% or higher.

When reviewing our policies, research has shown that these loans can result in unaffordable payment and high default rates for users so we will be updating our policies globally to reflect that. This change is designed to protect our users from deceptive or harmful financial products and will not affect companies offering loans such as Mortgages, Car Loans, Student Loans, Commercial loans, Revolving Lines of Credit (e.g. Credit Cards).

According to Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights, “This new policy addresses many of the longstanding concerns shared by the entire civil rights community about predatory payday lending. These companies have long used slick advertising and aggressive marketing to trap consumers into outrageously high interest loans – often those least able to afford it.” We’ll continue to review the effectiveness of this policy, but our hope is that fewer people will be exposed to misleading or harmful products.

The Community Financial Services Association of America, a trade group for the industry, says more than 19 million U.S. households use payday lenders.

“These policies are discriminatory and a form of censorship,” the trade group said in a statement. “Google is making a blanket assessment about the payday lending industry rather than discerning the good actors from the bad actors. This is unfair towards those that are legal, licensed lenders and uphold best business practices, including members of CFSA.”

Google is acting more aggressively than the US government. The Consumer Financial Protection Bureau is in the process of instituting new rules around payday lending, which the Wall Street Journal points out is usually regulated by states, but that is going to be a much slower process that Google’s. It’s government after all.

Google backs out of the mortgage business

From Australian Broker.

Google had barely dipped a toe in the mortgage business, but it appears the tech giant is getting out.

Last November, Google launched Google Compare for mortgages, an online tool that allowed home buyers to find and compare home loans. The product was initially available only in California, and joined other Google Compare products that allowed consumers to find and compare credit cards and various types of insurance. There was talk that Google Compare could have eventually entered the Australian market as well.

Google didn’t actually fund mortgages, but it did register as a licensed mortgage broker, according to a CNN report. The company had hoped to use its global reach to provide consumers with niche products and financial services, according to a Wall Street Journal report.

But it appears the Compare product line hasn’t been as successful as the search engine titan had hoped. According to the Journal, Google struggled to sell ads on Compare – and the largest lenders and insurers simply declined to come on board.

In an email acquired by the website Search Engine Land, Google informed its partners that all Compare products – mortgage, insurance and credit card – would begin winding down immediately and shutter for good on March 23.

“Despite people turning to Google for financial services information, the Google Compare service itself hasn’t driven the success we hoped for,” the email stated. “We greatly appreciate your partnership and understand that this decision will be disappointing to some. But after a lot of careful consideration, we’ve decided that focusing more intently on AdWords and future innovations will enable us to provide fresh, comprehensive answers to Google users, and to provide our financial services partners with the best return on investment.”

The Compare site was always a risk. According to a Fox Business report, analysts warned at the outset that the product, by allowing consumers to buy mortgages and insurance policies directly, had the potential to anger lenders and insurers who were major advertising clients of Google.

Google has not yet officially commented on the shutdown.

Further details about the closure were reported in Search Engine Land.

Google’s lead generation product known as Google Compare, will start sunsetting this week.

In an email sent to partners and acquired by Search Engine Land, the Google Compare Team told Compare partners on Monday night that the product will start to wind down on Tuesday, February 23, 2016. Google Compare will shut down completely in both the US and UK — the two markets where Compare is offered — one month later on March 23.

The email to Compare partners:

From: Google Compare Team
Subject: An Update on Google Compare

Dear Partner,

Beginning on February 23, 2016, we will start ramping down the Google Compare product, which is currently live in both the US and UK. We plan to terminate the service as of March 23, 2016. As you know, Google Compare (formerly Google Advisor in the U.S.) has been a specialized, standalone service that enables consumers to get quotes from a number of providers for financial products such as car and travel insurance, credit cards and mortgages.

Despite people turning to Google for financial services information, the Google Compare service itself hasn’t driven the success we hoped for. We greatly appreciate your partnership and understand that this decision will be disappointing to some. But after a lot of careful consideration, we’ve decided that focusing more intently on AdWords and future innovations will enable us to provide fresh, comprehensive answers to Google users, and to provide our financial services partners with the best return on investment.

We’re grateful for all the feedback that you have provided over the course of this product’s development, and we are looking forward to partnering with you to achieve greater success in the future.

We will work with you during this transition and beyond. Please reach out to your Google representative if you have any questions and to discuss the next steps.

The Google Compare Team

Google has confirmed the email’s authenticity.

The company only recently began rebuilding the Compare product from the ashes of the Advisor program in the US. The single piece left standing from that initial effort was the credit card offering — savings accounts, CDs and mortgages had all discontinued. Compare for Auto Insurance launched just last March, starting in California. Then Google relaunched Compare for Mortgage quotes in November with Zillow and Lending Tree among the launch partners. Both of those relaunches had limited roll outs. In the UK, Google Compare has been running since 2012 for car insurance, mortgage rates, credit cards and travel insurance.

A Google spokesperson told Search Engine Land that while searches on these queries remained high, the product didn’t get the traction it hoped for and revenue was minimal. That’s in part due to the limited availability of the products in both the US and the UK.

In the UK, the Compare product also came under scrutiny in 2014 by the Financial Conduct Authority, the UK financial services industry regulator, when comparison sites complained Google was competing unfairly by placing its own product at the top of the search results. However, any legal concerns did not play a role in the decision to close Compare, we’re told.

What’s next? Google says the focus will primarily be on AdWords and transitioning partners to standard ad products. However, it may still focus on the space and look at new product avenues.

While the move will come as a surprise to many outside the company, apparently internally this decision to terminate Compare is not coming as a shock. The Google spokesperson said the company will help Googlers currently working on Compare find new roles within the company.

Apple’s brilliant assault on advertising — and Google

From Calacanis.com

Apple’s brilliant assault on advertising — and Google

For their iOS 9 release, Apple not only permits, but actively encourages developers to make Apps that remove advertising and tracking from the web. They added this feature deliberately; it’s not a hack by developers they’ve turned a blind eye to.

HOW EFFECTIVE ARE MOBILE AD BLOCKERS

I’ve been using two Apps called Adblock Fast and Crystal for the past week and surfing the web on my iPhone has become delightfully fast and uncluttered. Blocking ads on your mobile phone is like moving from a crowded apartment complex in a polluted, violent city to a peaceful lake house.

It’s a massive, noticeable change for two important reasons that have to do with the device you’re holding: screen size and bandwidth.

Given the increasing size of our desktop monitors, multiple windows to choose from, and increasingly fast cable modems and fiber connections, ad blockers have been a minor innovation on the desktop this past decade. (We hate you if you have fiber, really.) On a desktop, you barely notice the ads are gone, because the ads weren’t laying on top of the content. They were typically around the content.

On an iPhone, well, you’re dealing with 5-10% of the screen size of your desktop monitors, so publishers putting up a roadblock on the content, then asking you to use your fat fingers to hit the tiny little X or ‘skip the ad in 4… 3… 2… 1…’ is just overbearing.

Mobile advertising is so ugly and intrusive, it actually makes people AVOID mobile browsing. That’s why the ‘read it later’ feature, pioneered by Marco Arment’s brilliant Instapaper and Nate Weiner’s Pocket, became so popular that Apple copied them. When a user hits ‘read it later,’ it means ‘read this when I don’t have to deal with all this bullshit.’

APPLE’S MOTIVATION IS MARGIN

Apple doesn’t give an ‘ish about advertising, unless of course they’re buying it for their award-winning TV commercials. (More on that later.) Apple cares only about you loving and using the product that now generates nearly 70% of their (top-line) revenue – and perhaps even MORE of their (bottom-line) profits – the iPhone.

The iPhone is everything to Apple. Everything important about Apple – their resurgence as a company, the lust their fans feel for the brand, the fanboy/girl obsession with their keynotes, the slavish CNBC analysis over everything Tim Cook says – traces back to the luscious, warm-gravy margins of the iPhone.

For every 1% in smartphone marketshare Apple converts, they make another $10b a year in revenue*, and Apple very much thinks that they can convince the world to convert from cheap phones to the more expensive iPhone.

[ * back of envelope: 1.44b smartphones will ship in 2015, 1% = 14m iPhones * ~$658 average revenue per unit = $9.5b ]

And they’re right.

Life is better in Apple’s world.

WHY LARRY LEFT GOOGLE

Google is assaulting us with advertising to the point that the FTC and EU want to sanction them (in fact, the WSJ reported that, magically, the FTC’s action against Google was killed – conspiracy theories abound).

What is not up for debate is that Google is ripping away our privacy every day, taking the most intimate pieces of our lives and selling them in buckets of parts – like pieces of cow flesh in a Whole Foods display case.

Google makes a massive portion of their money, according to studies, getting people to accidentally click on ads (40% of people don’t know Google Ads are ads). Ads that are taking up the top 11 of 13 search results on some search pages.

Google kept heating up the water until they accidentally boiled the frog. And the frog is us.

Apple knows it and they’re assaulting Google on every front. Ad-blocking is the attack we are talking about today, but privacy is another and their wildly-improving, hiding-in-plain-sight search engine is yet another. I wrote about this search engine back in June 2015, and I will do a Part 2 of this piece if someone reminds me and I actually get some sleep this week. (I got some life-changing, big news last week and I’m not sleeping well … I’ll disclose it when Gayle King interviews me about “having it all.”)

Google knows what’s up, and that’s why Larry gave himself a promotion to CEO of Alphabet.

Larry doesn’t want his legacy to be grinding every last percentage point out of their advertising network. Sergey doesn’t want folks coming up to him at parties and asking him about why they are trying to kill Yelp, Mahalo, and eHow (trust me, I have the inside line on this one).

Nope, like the Middle Eastern sovereign wealth fund I met with yesterday, Google is trying to trade their oil money for something more refined, like self-driving cars, life extension (Calico) or home automation (Nest).

Google wants to be proud of their legacy, and tricking people into clicking ads and selling our profiles to advertisers is an awesome business – but a horrible legacy for Larry and Sergey.

[ Side note: When I asked the Sovereign wealth fund why they were bothering to meet with me, when they had billions of dollars to put to work and I angel invest $100,000 at a time, they said they were rebalancing their oil to tech and they needed to meet with the ‘mother of unicorns.’ I think that makes me Khaleesi? That’s kind of awesome. ]

IS IT MORAL FOR APPLE TO BLOCK ADS?

It’s your device, so you can do whatever you want with it. When you download something onto your device, it is now yours to remix and play with in any way you want – provided you don’t republish it and make money from it. (Fair use is the exception here.)

According to this basic tenet, if I buy the New York Times in print, clip out all the ads and then tape it back together at home, well, that’s my right.

Now, Apple didn’t just bake ad blocking into the browser. They enabled developers to add ad blockers – via the App store – to consumers’ browsers. In this way, you still have to buy the scissors and clip the ads, but that takes under five seconds and will be enabled for the rest of your life.

Apple could, and would, be sued by publishers if they enabled it themselves.

They would be sued, in all likelihood, for breaking the publishers’ Terms of Service, or perhaps better stated, for helping users to break the Terms of Service. This means if you make an App that blocks ads, be ready for a HUGE lawsuit. It will happen if these things hit scale. Apple might become party to these lawsuits for contributing to the interference of a company’s ability to do commerce. The side argument will be, as I’ve outlined in this post, that Apple and the ad blocker companies are benefiting unfairly on the publishers’ backs – consider this piece an amicus brief.

I’m not sure any of these legal concepts would actually work, but Google and publishers will put up a united front against ad blocking if it becomes > 25% of mobile users – of that you can be sure.

Is it moral for Apple to screw publishers? Wow, that’s a big question, but in a nutshell, this is business and it’s not personal. Apple wants to make consumers buy iPhones and use them and blocking ads will help them beat Android.

Apple’s highest moral commitment is to users – not publishers. So, although Apple covets content creators, it doesn’t put their need to make a few shekles above a user’s ability to enjoy the experience of the iPhone.

Apple really wants publishers to charge for content and take 30% through the App store and their marketplaces. People who work at Apple are rich, so they don’t really get the concept of not being able to afford to pay for content.

It’s classist, to be sure. Just like the margins on iPhones make them hard for poor people to embrace them. Then again, if you look at the cost of a new iPhone phone every 30 months, it’s around $20 a month (say $650 with a $50 trade in of your old phone).

If an Android phone was half the cost of an iPhone, the cost difference is $10 a month – or about one hour of work for the lowest paid folks in the United States.

One extra hour of work a month to own the best device as your PRIMARY consumption device in the world IS A BARGAIN.

Tim Cook knows this and he is watching as the poor people of the world figure it out. Apple’s message is the same as Starbucks: treat yourself poor people, you deserve it!

And they’re right! Why shouldn’t the housekeeper, gardener, or teenager spend just $0.35 a day to have the better phone if they use it three or four hours a day?

Back to stealing.

Would Apple allow you to put a bittorrent App on your phone and download TV shows and series, instead of paying for content in iTunes? Well, we actually know the answer to that question – hell no!

Apple draws the line at stealing content, and doesn’t see the subversion of ads as stealing – which all of us in the real world know it is. Undermining a publisher’s ability to monetize is stealing, but it’s Robin-Hood, feel-good stealing.

So killing advertising not only crushes Google, it also could flip many publishers from ad-driven models to subscriptions … in Apple’s App store.

Oh yeah, Apple launched a News App as part of iOS 9, too.

That’s interesting timing. I wonder if Apple will launch a ‘pay $10 a month for 500 newspapers/magazines’ subscription and share that revenue with those publishers based on some slick algorithm. (Consumption + a base payment for everyone.)

Apple will make their News App the Spotify of Content … giving every publisher a basic income based on the profits of the iPhone ecosystem. In fact, Google bought Oyster which was the “Netflix of books.” The idea of a big company providing all-you-can-eat for a monthly price is coming soon, you can be sure of that.

In Conclusion

Publishers are screwed.

Google is really screwed.

Consumers win.

Apple really wins.

Now, will consumers ultimately lose because publishers go out of business? That’s the obvious question … with the obvious answer: we’re gonna find out next year.

One thing you can count on: Apple has a Master Plan around privacy, saving the news business, doubling iPhone market share and killing Google for double-crossing Steve Jobs.

Never forget what Steve Jobs said:

“I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right this wrong. I’m going to destroy Android, because it’s a stolen product. I’m willing to go thermonuclear war on this.” – Steve Jobs to Walter Isaacson in 2010.