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Stephen Logan

Google Readying itself for a Big Hit from US Regulators

11th May 2011 News, Industry News 1 minute to read

It would be fair to say that Google has become fairly accustomed to dealing with Government probes and antitrust hearings over the last few years. Even so, it would appear that the search giant is readying itself for a fairly substantial hit in the upcoming investigation by the US Government into advertising practices. In fact many sources suggest that this could amount to a war chest of half a billion dollars.

So is this an admission of guilt or the result of a safety-first approach by a company that has, as already mentioned, felt the wrath of authorities on numerous occasions?

Information relating to this particular investigation is currently limited. However, what we do know is that it concerns the activities of “certain advertisers”, presumably on AdWords, AdSense or DoubleClick (possibly all of the above). However, for a company that made $2.3 billion in the first quarter of this year alone, even $500 million isn’t going to do too much damage to its bottom line.

Worldwide, Google is facing a number of additional challenges. At the tail end of last month President Sarkozy invited the leaders of the search engine and other Internet leaders to the G8 summit to discuss taxation [see: Sarkozy invites web leaders to G8, wants more tax | Reuters]. France has previous with Google particularly, having threatened to impose a special levy on all income made by online advertisers within the country.

It was reported in January 2010 that Google had made $720 million in advertising revenue in France, a country where broadband is subsidised by the state. And it is this issue that has led the French authorities and those in many other countries to take umbrage at the tax-free/reduced tax that they enjoy in individual principalities. Most of the operational tax goes back to the nations in which the company is headquartered, which is the US of course and Ireland in Europe.

Therefore this is a volatile time for the search engine and potentially expensive too. However, it appears that Google are well prepared for the worst, which should mean that there’s no significant impact on advertisers or other services.

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