Google’s recent announcement of $340 million in ad credits to help small- and medium-size businesses amid the coronavirus pandemic could also help Google itself long after the health crisis has ended.
The move accomplishes two things: It provides modest relief to businesses that have taken big financial hits since the outbreak. And it also helps one of Google’s most important groups of customers survive so they can buy ads from Google down the road.
Small- and medium-size businesses account for about half of Google’s ad revenues, Michael Levine, an analyst at Pivotal Research, estimates. That would translate into more than $55 billion of Google’s $113 billion in ad revenue last year.
“If there’s anything keeping me up at night, it’s the amount of exposure Google has to SMBs,” he says, using shorthand for small and medium-size businesses. “If SMBs go bankrupt, that’s going to be a structural problem.”
The ad credits are a part of Google’s more than $800 million initiative to help businesses, health organizations, governments, and health workers during the pandemic. Google is offering $250 million in ad grants to the World Health Organization and government agencies to help them share important information about the virus. The company is also providing $20 million in Google Cloud credits to academic institutions working on combating the virus so they can crunch data, and financial support for safety gear and medical devices for the CDC Foundation, a nonprofit that supports the Centers for Disease Control and Prevention.
The ad credits come at a vital time for small- and medium-size businesses, many of which are shut down by local “shelter in place” orders or have already folded because of lost business. The federal government is trying to set up a small-business loan program to pair with the $2 trillion stimulus bill President Donald Trump approved last week. But aid from companies like Google could, in a limited number of circumstances, help bolster the assistance to small- and medium-size businesses.
To be eligible for the ad credits, businesses must have been actively using Google’s ad services since Jan. 1, 2019. The credit, available to businesses worldwide, is expected to be automatically applied to customers’ accounts in the “coming months.” Credits will expire on Dec. 31, 2020. Google did not provide information on how many credits each business can expect to receive or how many businesses are eligible for the credits.
Google isn’t the only company trying to aid vulnerable businesses during the outbreak.
Two weeks ago, Facebook announced similar aid to small- and medium-size businesses. The social network is setting aside $100 million for both ad credits and cash for 30,000 small businesses in more than 30 countries. Businesses aren’t required to have a previous affiliation with Facebook, such as being an ad customer, to be eligible for the funds. Facebook plans to announce more details about the aid in the coming weeks.
“We’ve heard loud and clear that financial support could enable them to keep the lights on and pay people who can’t come to work,” Sheryl Sandberg wrote in a Facebook post in announcing the new funds.
The ad credits won’t have any noticeable impact on the massive businesses offering them, Levine says. Last year, Google had $34.4 billion in profits, while Facebook had $7.3 billion. And each had more than $15 billion in cash and cash equivalents.
“They’ve got a massive cash position,” he notes. “Even if things were going poorly, they’re not going to lose money.”
In any case, the amount of money that companies stand to lose by giving away ad credits is debatable. There’s only an expense if the ads they give away displace ones that other advertisers would have paid for with real money.
But beyond the money, Levine says offering small- and medium-size businesses help during the global pandemic is just the right thing to do for massive companies like Google and Facebook.
“My overall mantra is to think of revenues as being secondary to thinking through long-term relationships with clients,” he says. “It’s smart and shows goodwill.”
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