Google pushes back on levies

TOUTS INNOVATION

SEAN CRAIG OTTAWA • Google Inc. has no interest in paying levies to offset the impact the technology giant has had on the digital media industry in Canada, company officials told a House of Commons committee Tuesday.

“Our view is the way forward is through innovation,” Jason Kee, Google’s counsel for public policy, said to a panel of MPs studying the media industry. “Creating subsidies is not profitable in the long run. It doesn’t spur the innovation needed for sustainable models.”

Google doesn’t break down its advertising income into country segments, but MPs noted that the company has been the target of repeated complaints from other media companies that have testified that its hold on the digital advertising market has severely hampered their businesses.

Print media have struggled with a collapse in print ad revenue, which fell 12.6 per cent last year to $1.4 billion, while simultaneously failing to make up the difference with digital ad dollars.

Data firm Statisa estimates that Google’s ad revenues make up 30.9 per cent of the total worldwide digital ad market: Internet ad revenue in Canada reached $4.6 billion in 2015, growing 21 per cent year-over-year. Last quarter, which ended in June, Google reported websites revenue of US$15.40 billion, a 24-per-cent increase from the prior year.

MPs from the governing Liberal party and opposition NDP suggested that the closures of local and regional media outlets in recent years, and a decline in privately held French media in rural areas, were in part caused by disruption in the digital advertising market.

Google, however, pushed back against the idea of direct tariffs to subsidize Canadian industries or the application of the GST to its online services. “We need to unlock new revenues and business models,” argued Richard Gingras, Google’s vicepresident of news.

Gingras pointed to Local XPress, a digital-only local news website that covers Halifax, which was started by journalists on strike from the city’s Chronicle Herald newspaper. He said the site has “grown tenfold” in under a year and uses Google’s platforms to monetize its content. The tech firm claimed 70 per cent of banner ad revenues went to its partners.

“Google is grabbing nothing from no one,” Gingras said. “Google was fortunate enough to put in place new and highly scalable kinds of advertising systems. We’ve been effective. Our ad systems are used by two million people around the globe, with 70 per cent to the publishers. In many respects it is game changing.”

Kee warned that the added costs of the GST to services would subsidize legacy media organizations with struggling business models at the expense of new and innovated digital startups.