Google accused of ‘misleading’ Senate on revenue

Google has been accused of misleading a parliamentary committee over how much advertising revenue it generates.

Google’s Jason Pellegrino gives evidence to a Senate committee yesterday. Picture: John Feder

Google has been accused of misleading a parliamentary committee over how many billions of dollars in advertising revenue the tech behemoth generates in Australia.

Google’s most senior Australian-based executive, Jason Pellegrino, clashed yesterday with senator Nick Xenophon, who warned that he did not like being “misled” over discrepancies worth billions of dollars.

Senator Xenophon questioned Google and Facebook at a Senate select committee on the future of public-interest journalism about whether their declared ad revenues were accurate.

Google told the Senate committee it had gross revenue of $1.1 billion in Australia last year, while Facebook gave a figure of $326 million. Media buyers and analysts estimate Facebook’s gross revenue to be about $1bn and Google’s $3bn.

In evidence to another Senate committee yesterday, internet giant Facebook admitted it was still booking revenue from ­Australian advertisers in tax-haven Ireland, despite a government crackdown designed to stamp out the practice.

Investment bank Morgan Stanley has stated that Google and Facebook took $4bn-$5bn worth of Australian advertising revenue last year.

Mr Pellegrino, Google’s Australia and New Zealand managing director, told the committee: “I have read those reports and I’m not in a position to speculate on those media reports.”

Senator Xenophon replied: “Mr Pellegrino, I hate being ­misled. When you say that you have $1.1bn in revenue here in Australia … does it include the revenue that goes through overseas companies such as offshoots of Google in Singapore and other jurisdictions?”

Mr Pellegrino responded: “To the best of my knowledge, all the revenue generated in Australia is generated through our Australian business and represented in that figure.”

Facebook’s Aine Kerr gives evidence to a Senate committee yesterday. Picture: John Feder

Senator Xenophon pressed Mr Pellegrino on whether ­Google’s advertising revenue was “more in the region of $3bn, rather than $1.1bn as you have ­asserted”. Mr Pellegrino replied: “Senator, I’m not in a position to speculate on those numbers. We have a policy globally of not reporting numbers in a specific country, and I’m not in a position to break that down any further.”

Senator Xenophon hit back, saying: “This is really upsetting me, Mr Pellegrino, because journalists are being laid off seemingly on a weekly basis in this country. You’re telling us that Google only takes in $1.1bn in advertising revenue when the advertising industry is saying it’s more like $3bn. Can you categorically say … it is only $1.1bn? Are you absolutely sure?”

Google’s head of public policy, Ishtar Vij, interjected: “The 2016 accounts which Jason is referring to reflect a transition year as we restructure our business.”

Following changes to Google’s accounting treatment, it is expected the 2017 accounts will reflect more of the company’s commercial activities. Corporate tax minimisation schemes enable Google and Facebook to channel ad sales bookings through overseas markets. They also benefit from global ad sales deals with multinationals.

Melbourne Business School adjunct professor Mark Ritson, a columnist for The Australian, told the inquiry that Google and Facebook accounted for the vast proportion of digital ad spending.

“There is a significant shortfall between what you have heard this morning and what appears to be likely,” Professor Ritson said.

A spokesman for Facebook later told The Australian: “The $326m figure is the revenue that is supported by our Australian offices in Sydney and Melbourne.”

Senator Xenophon said the shift to a market controlled by Google and Facebook had far-reaching repercussions for media diversity and the commercial survival of domestic media companies.

The Turnbull government continues to negotiate with the Nick Xenophon Team over tax writeoffs for small outlets to win its support for a media reform bill. To secure the passage of the bill, the government has already agreed to a competition regulator investigation into Google and Facebook following pressure from Senator Xenophon.

Facebook’s head of journalism partnerships, Aine Kerr, said: “We are paying out $US1m per day to publishers, 10,000 of them across the world.”

Senator Xenophon suggested the share of revenue that publishers received from Facebook traffic did not come close to covering the investment they made in creating content.

“You’re paying $US1m per day to 10,000 publishers. That’s $US100 per publisher. Is that right?” he said.

Senator Xenophon also revealed that publishers had been forced by Google to unlock paid content or face demotion in search results.

“In short, do what we say or else,” he said. “That must be a classic case of abusing market power.”

Mr Pelligrino responded: “Senator, I’m not aware of those conversations.”