Commentary

Google's Chickens Come Home To Roost In Its Toughest Week Ever

Money talks, everything else takes a walk. It's a common phrase often repeated with an expletive in the middle, but there is surely no better way of summing up what's happening with Google this week. If Brexit woes and Scottish Independence gave Theresa May a shocker of a week last week, this time it's Google's turn.

Today its top guy in the UK, Matt Brittin, will be in the last place where he would choose as he delivers a speech to adland in London on the first day of Advertising Week. By the end of the week, a delegation is due to report back to the Cabinet Office on what the company is going to do to stop taxpayer-funded ad campaigns appearing next to extremist videos. The government has already suspended Google advertising and it will be looking for a good reason to resume. 

As for adland, well, the list of agencies and brands that have dropped the tech giant is a veritable who's who of advertising. Havas has been the latest to join a boycott list alongside Publicis and WPP has written to its clients to ask whether they wish to drop Google too. Brands that have already taken aversive action themselves include, most recently, M&S, Vodafone, Sky, HSBC, Lloyds and Royal Bank of Scotland. They join a first wave of boycotters that included McDonald’s, L’Oréal, Audi, Sainsbury’s, Argos and the BBC. Ahead of Ad Week opening this week, Unilever refused to state its position on a boycott.

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The trouble is that Google has no friends here. Regular readers will know I've been pretty hard on Google over the years, but it's only to bring home the reality of how politicians, and now brands, feel about the tech giants. It can't be too surprised to find itself in an isolated position.

Firstly, we have the long drawn-out saga of the EU antitrust case against it. Google has responded to a list of charges that it favours its own businesses in search and insists unfairly that its apps must be shipped pre-installed on an Android device. The defence was pretty much that it doesn't cause an imbalance between its business interests and serving its customers.

Nobody is under any illusion that Google has a massive, punitive fine coming its way. My only question is whether by dragging this case out -- Google even got an extension on a previous deadline to defend itself -- has the tech giant made enough money from what it is accused of to pay the fine, anyway?

The politicians are after Google, then, but not just for antitrust reasons. The elephant in the room whenever Google is mentioned is how it, just like Facebook and others, is managing to pay ridiculously low taxes by using every sophisticated trick in the book to make it appear as if money is not earned in the UK. If it was so squeaky clean you have to wonder why it recently agreed to pay GBP130m (including interest) to the Treasury in back taxes between 2005 and 2015.

Industry estimates suggest that even with a conservative eye on the figures, Google would have made around GBP7bn profit over this period -- yet has now paid, including previously paid tax, around GBP200m. That works out at a tax rate of less than 3%. Even if you factor in contributions and payments to American staff, it would be hard to put Google at paying more than the equivalent of 5% tax in a country where corporation tax is 20%.  

Google is due a bloodied nose and it's going to get one this week from adland which is fed up of it taking billions in revenue yet not policing its own back yard to ensure it is as brand safe and fraud free as possible. UK politicians will be relatively powerless in this other than to gratefully accept whatever Google deems appropriate in tax as it decides whether to put its budget back on YouTube. 

The bigger blow will come from the EU at some stage this year -- and remember we said that last year too -- when a massive fine will be levied against them. But then consider this. Whatever the fine, you can bet your bottom dollar that Google has made way more money transgressing rules than the fine it may be asked to pay.

It's also worth remembering that some analysts have even suggested Google makes more from the UK government in advertising than it pays in tax anyway. It's a hard figure to back up or refute, but the accusation certainly should tell Google everything it needs to know about how it is viewed in the UK and the wider EU.

So governments can't do too much but put a stone chip in Google's bodywork that will take a few moments to fix. With Adland, however, that's a very different matter. Turn off the taps and Google will buckle. What's the betting by the end of the week they have suddenly happened upon a way of tackling fraud and ensuring brand safety?

It can be fined all it wants, be hauled over the coals on tax -- but what really matters to Google is advertisers losing trust and withdrawing budget. The week ahead is the biggest that Google UK will have ever endured.

1 comment about "Google's Chickens Come Home To Roost In Its Toughest Week Ever".
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  1. Paula Lynn from Who Else Unlimited, March 20, 2017 at 1:26 p.m.

    Out of your mouth....as the saying goes.

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