Google’s feud with the Australian government has not only dominated news headlines for the past few weeks but overseas observers are keenly watching on to see who’ll blink first.

In one corner, treasurer Josh Frydenberg is pushing his News Media Bargaining Code that would see Google pay for using locally produced news content and see the tech giant invoiced upwards of $1 billion a year.

On the other side, the tech behemoth is threatening to shutter its local operations and take its reported $53 billion worth of value to the local economy with it.

Google’s fear, arguably, is that if it happens here it can happen anywhere and follows news from mid-January that its Silicon Valley chiefs had agreed to pay major French publishers for linking to their content.

Over the weekend, Canadian authorities labelled Australia’s plan the “perfect solution” to its very own Google woes. So, it’s clear the dominoes are starting to line up.

So will Google make good on its threats and pack its bags and head to Sydney airport? And if it were to, where would that leave agencies and their clients?

One keen industry observer of the ongoing – and it’s been ongoing – ding-dong is Nick Beck (main photo), CEO of Sydney-based digital performance marketing agency Tug.

For Beck, one of the more unusual aspects of the government’s decision to take on a company said to be worth an estimated $US280 billion, that operates in 200 countries, is the enormous benefit it brings to SMEs in Australia.

“The risk to Australia here is pissing off all the small businesses [if Google were to leave] and I think ScoMo would be aware of that. Small businesses do very well out of the tech giants – Google and Facebook – in terms of their advertising,” Beck told B&T.

“The argument you hear from the likes of News Corp and the government is that Google has been destroying regional newspapers through local advertising. But actually that’s not entirely true. And by that, I mean that the Google/Facebook advertising model is just better for smaller business – more targeted and more efficient. Australia would be doing small businesses a disservice to get rid of Google, in my opinion,” he added.

“Josh Frydenberg’s argument is that these tech giants are making money off the back of great journalism – and there’s a global argument for that. And it kinda feels that the writing is on the wall for that, that Google will have to pay something. The question is how much and what for?” he said.

Where the debate gets murkier, Beck adds, is that Murdoch’s News Corp has railed against the tech giants’ power for some time and the government pressing its News Media Bargaining Code could be seen by many as a way of getting more favourable coverage in News Corp-owned media.

It’s often argued that Google killed off regional newspapers in Australia; however, the real irony here, according to Beck, is that one of the probable culprits in Australia was the News-owned Realestate.com.au and the Nine-owned Domain, which eroded regional property advertising revenues.

“That said, the last thing Google wants is a western democracy shutting it down, telling the world that they can function without Google,” Beck added.

“And all this brings Microsoft’s Bing into the picture, the 11^th most popular website in the world.

“Tug has done tests with Bing in the Australian market and it’s results are on par with Google in the major client verticals, however Bing’s local business offering is not as sophisticated as Google’s. Yahoo (remember Yahoo?) still has an offering in Japan and could potentially make inroads in Australia if Google disappeared.

“The third option is that Apple could come in and go, ‘I’ll take advantage of this.’ The rumours are that Apple’s starting a search engine and if Google pulled out Apple could do a deal with the Australian government and walk straight in.

“And this is why I think Google is bluffing over its threats to exit Australia,” Beck added. “Sure, we’re a small market for them but the risk for Google is that other markets – say Europe or Canada – if they saw that Australia could function fine without Google then that would be a huge concern for them.”

Another problem for the Australian market is that Google has about 95 per cent of all search functionality here, making them virtually a monopoly. “And I don’t think anyone thinks that less competition is a good thing,” Beck added. “Even in the US, Bing has about 20 per cent [of the search market].

“Again for agencies and their clients it’s obviously better to have more tools to be able to market, that there’s not one person you have to rely on,” he said.

Another issue for Google if it were to exit our shores is that it uses Australia as a test market, Beck revealed.

“Australia is a bit of a sandbox for Google, it can test new betas in an English-speaking country which mirrors American user habits.

“They know that Australians search and act and think in a very similar way to Americans and that means Australia – and this is good news for agencies and clients – is more advanced than a lot of other countries when it comes to digital innovation,” he said.

As the war of words drags on, ultimately what does Beck think will happen?

“I think Google leaving Australia is the worst outcome for everybody concerned. I see this ultimately being negotiated.

“The Australian government is saying ‘You must pay for everything’ and Google is saying if that happens, we’ll pull out. There has to be some sort of agreement made. This needs to be much more than the federal government kowtowing to the wishes of Nine and News. But Google will have to come to the party, too,” he said.