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Why Google Is Slowing Its Ad Business in Canada

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Google finds compliance with new rules difficult

Alphabet’s (GOOGL) Google won’t allow certain political advertisements to run on its platforms in Canada in the coming months ahead of the country’s federal election, according to a report from Reuters. In December 2018, Canada adopted new rules on election advertising, which—among other things—require digital advertising platforms to keep a record of all political ads they publish.

Google made the drastic decision to stop taking election ads regulated by the new rules after realizing that complying with the rules would be too difficult for it. Canada is expected to hold its federal election in October 2019.

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Google chooses to leave money on the table

Google is sure to be leaving money on the table by choosing to limit its participation in running election ads in Canada. Advertising is Google’s bread and butter. In the fourth quarter, advertising contributed 83% to total revenue at Google’s parent, Alphabet. Google’s advertising revenue increased 19.9% YoY (year-over-year) to $32.6 billion in the same quarter. Advertising revenue rose 30% YoY at Facebook (FB) and 23% YoY at Twitter (TWTR) in the quarter. Baidu (BIDU) and Yelp (YELP) recorded 10% and 12% YoY increases in advertising revenue, respectively, in the quarter.

Google’s decision to forgo political advertising dollars in Canada isn’t surprising—even though it will cost the company a loss of revenue in the country. Since coming under fire in the aftermath of the shocking outcome of the US presidential election in 2016, digital advertising providers such as Google have generally sought to be extra careful about how they handle political ads.

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