Examination of
the value created by
the advertising technology
industry in Australia
September 2021

Report Prepared by PwC Australia
September 2021

Contents
1. Highlights

4

2. Advertising technology industry in Australia

7

3. Google’s advertising technology

13

4. References

21

5. Appendix

23

Disclaimer:This report is not intended to be used by anyone other than Google Australia Pty Ltd (Google).
We prepared this report solely for Google’s use and benefit on terms and for the purpose agreed between us and Google. In doing so, we acted
exclusively for Google and considered no-one else’s interests.
We accept no responsibility, duty or liability:• to anyone other than Google in connection with this report• to Google for the consequences of using or relying on it for a purpose other than that referred to above.
We make no representation concerning the appropriateness of this report for anyone other than Google. If anyone other than Google chooses to use
or rely on it they do so at their own risk.
This disclaimer applies:•

to the maximum extent permitted by law and, without limitation, to liability arising in negligence or under statute; and•even if we consent to anyone other than Google receiving or using this report.

Liability limited by a scheme approved under Professional Standards legislation

The advertising technology industry
PwC

September 20212

1Highlights

Highlights

Advertising technology provides benefits throughout Australia through its value across a wide
supply chain. For the purposes of this report, the advertising technology industry includes any
technology involved in connecting a buyer and a seller of online advertising inclusive of transaction,delivery and measurement. Google is a key provider of these products in the industry andfacilitates a large portion of these benefits. These include the direct benefits to businesses
generated through their use of Google’s advertising technology, as well as the flow-on effects
facilitated by improved productivity as a result of their use. We estimate that the current level ofusage of Google’s advertising technology platforms both directly and indirectly support:

The equivalent of 23,000 full-time jobs
annually across the advertising technology
supply chain1

Approximately $2.9 billion to GVA
annually across the advertising technology
supply chain2

Approximately 22% of direct benefits
supported by the advertising technology
industry are realised in regional Australia3

Approximately 75% of Google’s
advertising technology users are Australiansmall and medium sized enterprises4

72% of businesses report an observed

Advertising technology annually boosts

difference between Google advertisingtechnology and other platforms on themarket5

The economic benefits of the advertising technology industry in Australia
PwC

exports by $1.1 billion throughstimulating economic activity across allindustries6

September 2021
4

The purpose of this report is to determine theeconomic benefits of advertising technology and
Google on Australian businesses
This analysis incorporates the economic value of advertising technology in Australia and thecontribution of Google’s advertising technology platforms to Australian businesses.
Firstly, this report includes the definition of the advertising technology ecosystem. It also provides
an estimate of the economic benefits of advertising technology to the Australian economy.
Secondly, this report identifies Google’s advertising technology platforms and includes anassessment of the direct and indirect (flow-on) economic benefits of the Google’s advertisingtechnology products to the Australian economy.
As such, the remainder of this report is organised in two parts:●

Section 2 - provides background on the Australian advertising technology industry anddetails related to the shape of the advertising technology ecosystem for the purposes of thisreport. In defining and shaping the ecosystem, this section also provides an estimate of thevalue of the entire advertising technology industry in Australia.

●

Section 3 - includes a comprehensive economic analysis of the contribution of Google’s
advertising technology platforms to Australian businesses, as well as details about a surveyof business decision-makers undertaken to develop personalised insights into the value ofthe technology.

Finally, Appendix A provides detailed information about the modelling approach taken to develop
the economic contribution.

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5

2AdvertisingTechnology
Industry inAustralia

Introduction

The recent rise of the advertising technology
industry has facilitated substantial economic
benefits to the Australian economy that is little
understood. This is compounded by the factthat Google’s role in the ecosystem is often
seen to be neither fully understood norappreciated. Advertising technology and
Google’s platforms have seen vast
improvements in the delivery and success ofadvertising campaigns that have led tovaluable economic benefits for Australianbusinesses and the wider economy.
Advertising technology services contribute to
the Australian economy in several ways
including the contribution to employment andcreating business opportunities across theadvertising technology supply chain.
Demand for online advertising services byAustralian businesses has grown over the past
five years as more Australians have beenusing search engines and other online
services to browse and purchase goods andservices.7

The economic benefits of the advertising technology industry in Australia
PwC

Using online advertising technologies
facilitates innovation across businesses ofdifferent sizes and locations, and supports
productivity and long-term economic growthacross the Australian economy. Small andmedium-sized enterprises (SMEs) andstart-ups can take advantage of online
advertising technologies to stay competitiveand grow their businesses.
In addition to direct employment and economic
activity impacts, using online advertisingtechnologies will stimulate employment
indirectly from the backwards linkages throughthe supply chain and through the flow-on
impacts on the economy of additional wages,salaries and employment.
The impact of Google and advertisingtechnology more broadly on consumers has
been well documented, yet little analysis has
been undertaken regarding its effects on
businesses.8 This report addresses this byidentifying and providing estimates for both thedirect and indirect benefits of Google’s
advertising technology platforms to Australianbusinesses.

September 2021
7

The advertising technology industry consists ofmany constituent technologies
Having researched the advertising technology industry in Australia, and constituent parts therein, it
is evident that this is a highly dynamic ecosystem, with a wide range of entities offering services
throughout its value chain. In its entirety, we consider the advertising technology industry to consistof the following constituent technologies:
Technology Type Defined as
Self-Service /A simple form of advertising transaction and delivery - the seller offers a “oneDirect to Publisher stop shop” solution where buyers can access the ad creation, buying,audience targeting and campaign performance reporting for their advertising
within the platform, all within a self-service software.
Ad Servers

Decision making engines for the delivery and reporting of ad campaigns.
They host ads that are served and are utilized to collect and store data. There
are both sell-side and buy-side ad servers.

Ad Networks

A technology platform that serves as a broker between a group of publishers
and a group of advertisers or a purchaser of inventory that is then onsold.

Measurement

Measurement services provide additional metrics for advertisers to monitor
their advertisement campaigns such as viewability.

DMPs and Data
Aggregators

Data Management Platforms (DMPs) are responsible for managing, storingand organising data for publishers and advertisers. Data Aggregators utilise
their data to create audience segments for targeting.

Verification

Verification services are used to detect and aim to prevent ad fraud. They
also assist with brand safety and viewability.

Dynamic Creative
management

A platform used for the live development, or in-flight optimisation, of ad
messages such as banners and video. This may also include data-led
dynamic creative

Exchanges*

A technology based auction room where real time bidding occurs andinventory is bought and sold programmatically. Campaigns can be
guaranteed (agreed $ and volume of impressions) or non-guaranteed in either
the open or a private marketplace (via real time bidding or, RTB).

SSPs

Supply Side Platforms are utilised to allow publishers to manage and supply
inventory to the exchanges.

DSPs

Demand Side Platforms are utilised to allow advertisers to bid on inventory
that is available on the exchanges.

The economic benefits of the advertising technology industry in Australia
PwC*It should be noted that as the industry has evolved, Exchanges and SSPs have effectively merged into a single entity due to theirinterchangeable functions.

September 2021
8

The advertising technology ecosystem is highly
dynamic

Advertising Technology in Australia
Buyers and sellers alike may use multiple combinations of one technology type to help create acompetitive advantage and there is no one ‘solution’ all buyers and sellers may use. While thispaper has sought to simplify the role of each technology type, it is also apparent many industry
participants may offer multiple services within their technology. When mapped, the flow of both thetransaction and the deployment of the advertising unit from buyer through to seller may look likethe following:“Ad Tech”

Path 1 - Self service

Path 3 - Ad Network

Path 2 - Direct IO / Ad
servedPath 4 - Programmatic

Supportive
technology data flow
(regardless of path)

It is important to note that not all technologies are used by all buyers and sellers of advertising, nor
is it a requirement for them to do so. One of the complexities of the industry is simply this – one
advertiser may select a broad suite of tools with the aim of buying a wide array of ad slots relevantto their target audience; whereas others may choose a relatively simple portfolio. In any case, theultimate result will be an advertisement being delivered to a consumer without any obvious visibility
to the end user of the technologies involved, or the level of complexity involved for it to bedelivered.
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September 2021
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While many advertising transactions could follow multiple pathways, and indeed most advertisers inAustralia may use multiple within their overall operations, to simplify, these pathways could
described as follows:

Path 1 - Self-service / Direct topublisher buying

Path 2 - Direct Insertion Order ad served

Under this pathway the seller offers a “one stop
shop” solution where buyers can access the ad
creation, buying, audience targeting andcampaign performance reporting for theiradvertising within the platform, all within aself-service software. There are a variety ofexamples, spanning Facebook, Twitter and
TikTok within social media, Spotify within audio
and even Nine Entertainment Co’s Galaxy for the
purpose of buying TV ad inventory.

This pathway covers buyers and sellers
negotiating their deal offline and signing an
Insertion Order (IO) contract for the delivery of
their campaign. Ad tech is typically then used in
the form of an ad server to take the campaign
messages from the buyer and have it delivered
into the media property by the seller. According
to IAB Australia reporting as of June 2021, thisremains the dominant inventory buying method
for General Display advertising expenditure tocontent publishers at 41%.10*

Path 3 - Ad network

Path 4 - Programmatic trading

Ad networks offer a further pathway between
buyer and seller by conglomerating (typically)
sellers, to be accessed by buyers. These ad
networks often offer additional services such asdata for audience targeting, buying algorithms orcreative services in addition to a simple interface
for buyers to buy inventory from a range ofsuppliers. This pathway would likely also makeuse of ad server technology.

The programmatic trading pathway sees buyers
and sellers each enacting technology to aid boththe transaction and delivery of advertising.
Buyers typically use a Demand Side Platform(DSP) to purchase placements sellers havemade available through a Supply Side Platform(SSP). This pathway takes a number ofsubforms, with both real-time bidding (RTB) andguaranteed (PG) variations being available.

As noted above, within advertising campaigns PwC’s research has found many buyers areunlikely to simply use one pathway, often favouring a mix based on, amongst other things:●
Complexity of campaign requirements●
Target audience●
Channel preference●
Variety of campaign parameters●
Capability and experience of buyer (and in many cases the seller)●
Flexibility requirements
The advertising technology industry
PwC*Note: According to the IAB Australia's Online Advertising Expenditure report for FY21, the proportion of expenditure by buying
type is calculated using domestic content publishers' expenditure only (i.e. excludes global publishers) and therefore thispercentage should not be extrapolated across the total general display expenditure market.

August 2021
10

Advertising technology plays an important role
within the wider digital advertising industry
The advertising industry as a whole provides large economic benefits to the Australian economy.
As a key input of the advertising industry, advertising technology facilitates a large portion of thesebenefits. To capture the value of advertising technology, we first need to understand the role that it
plays in delivering advertising in Australia.
Traditionally, advertising campaigns were largely delivered through broadcasting and print media
though as the use of digital media continues to grow, the prevalence of digital advertising follows.
In 2020-2021, 51% of advertising campaigns were delivered online.9 As shown in this report,
advertising technology today plays an important role across the supply chain in delivering
advertising.
Advertising technology is used to deliver advertising across a wide range of digital media formats.
Illustrated below is the total expenditure on digital advertising in Australia by the media format usedin financial year 2021. The total expenditure on digital advertising was $11.4 billion, with the highest
spending on mobile advertising ($6.1 billion), accounting for over half of total digital advertising
spend.10 Expenditure on connected TV (CTV) digital advertising rose to a high of $1.1 billion asAustralian’s media consumption patterns continues to develop to new technologies, further
indicating the dynamic ecosystem that the advertising technology industry plays in.

Total Expenditure on Digital Advertising in Australia (FY21)

Desktop Advertising,$2.9 billion

Mobile Advertising,$6.1 billion

CTV Advertising,$1.1 billion

Other Advertising$1.3 billion

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September 2021
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The advertising technology ecosystem provides
economic value across Australia
The advertising technology ecosystem is highly
dynamic, and provides value to a wide range ofparticipants. Using the definition of the ecosystem as
outlined in this report along with supporting evidence
Economic
Employmenton the size and role of the industry, we estimate its
value in gross value add (GVA) and employment$4b GVA
25,520 FTE
supported. The advertising technology ecosystem
Directly supported
Directly supported
directly provides $4billion in GVA annually, andsupports 25,520 full time equivalents (FTE) jobs.11
This constitutes the value provided to businesses
across Australia using the many constituent
technologies of the advertising technology industry.
The following map indicates the share of direct GVA supported by the advertising technology
industry across the country at Statistical Area 2 (SA2) level.12 As can be seen, the sector’s impact
is not limited by location. Whilst the areas with a higher proportion of value supported by theindustry are largely located in greater capital city areas, advertising technology GVA is supported
across all parts of the country. This is indicated by the value created in regional areas of Australia.
22% of the direct GVA supported by the advertising technology industry is realised in regional
Australia.13

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September 2021
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3

Google’sAdvertisingTechnology

The analysis outlined in this report is developed
using stakeholder engagement
To address the gap in understanding of the value of Google’s advertising technology to Australia,
we engaged with businesses across Australia to gather insights into the industry. Specifically, we:• undertook a survey of business decision-makers, receiving 1,019 responses. The economic
impacts of Google’s advertising technology platforms outlined in this report are developed using
responses gathered in this survey.
• engaged with a number of business decision-makers utilising advertising technology to develop
personalised insights into the value of the technology. All quotes used in this report are takenfrom this stakeholder engagement and illustrate the experiences of Australian businesses inutilising Google’s advertising technology platforms.

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Google provides a wide range of accessible
advertising technology platforms in Australia
Google offers a wide range of advertising technology products, providing value to all types ofAustralian businesses.
Google provides advertisers with a number of platforms allowing them to purchase inventory from asubstantial number of potential publishers, both domestic and international. This includes Google’s
ad buying products, Display and Video 360, Google Ads and Google Display Network, which allow
advertisers to purchase ad space directly from Google as well as third party publishers. These
platforms are all integratable with analytics and ad management tools such as Google Analytics
and Campaign Manager. Together, these allow advertisers to access rich data and analytics todevelop and target their marketing campaigns to their intended audience across a wide range ofdigital media sources. On the advertising supply side, Google provides publishers with Google Ad
Manager, Google AdSense and Google AdMob. These allow publishers of all sizes to connect witha large pool of potential advertisers so that they are able to generate advertising revenue on their
online platforms.
70% of surveyed business reported that they chose Google’s advertising technology
products due to its ease of use, and 45% reported that they chose Google’s products due toits greater effectiveness14

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Google’s advertising technology platforms offer
affordable advertising for SMEs
Australian SMEs are able to access a global
consumer base through Google’s advertisingtechnology platforms
SMEs are a vital component of the Australianeconomy, employing 7.5 million workers.15
Google’s advertising technology platforms have
had greater positive impacts on SMEs thanlarger organisations.
74% of SME’s reported an observed
difference in cost savings, time savings orbusiness growth through their use of
Google’s platforms, compared to 66% oflarge businesses.16
Google’s platforms provide these smaller
businesses with an accessible and affordable
pathway to reach their audiences. Advertisers
are able to reach potential customers globallyand with far greater efficiency.

Previously one newspaper ad may have
had 100 responses, now [using
technology] we get 100s of responses.
It's more sophisticated, but 1000% more
effective18
Compared to larger businesses, Australian
SMEs’ use of advertising technology issignificantly higher in retail and other services
industries.19 Ad tech has provided a platform
for these smaller retailers and service
providers to advertise and grow theirbusinesses.

On average, respondents indicated that 28%of their advertising media is targeted to an
overseas market.17
On the other side of the supply chain, smaller
publishers are given access to a large pool ofpotential advertisers that would otherwise be
unavailable to them.

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September 2021
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Google’s platforms provide both direct andindirect benefits to the Australian economy
To provide a comprehensive economic analysis of the contribution of Google’s advertisingtechnology platforms to Australian businesses, it is important to realise that Google’s platforms
have both direct and indirect (flow-on) impacts on economic activities in Australia. The overall
economic benefits of Google’s advertising technology products to the Australian economy can be
split into the following two major components:

Direct contribution of
Google’s advertisingtechnology platforms
Which is measured through its direct
employment and economic activity impacts(GVA) within the advertising technology supply
chain. The GVA generated by Google’s
advertising technology products is effectively
the value of advertising technology activity,and is equivalent to it’s direct contribution toAustralia’s gross domestic product (GDP).

The economic benefits of the advertising technology industry in Australia
PwC

Indirect contribution of
Google’s advertisingtechnology platforms
Through the stimulation of economic activity
up and down the advertising technology
supply chain. That is, the existence ofGoogle’s advertising technology products
provides opportunities for other businesses toreach potential customers with greater
efficiency, and stimulates employment andactivity across Australian businesses.

September 2021
17

Google’s advertising technology platforms
significantly contribute directly to Australia’s
advertising technology ecosystem
The survey demonstrated that Google
provides tangible value for companies acrossthe advertising technology supply chain.
Almost three in every four respondents who
utilise Google’s advertising technology
platforms indicated an observed difference in
Google’s tools over other available platforms,
through tangible cost savings, time savingsand business growth.20 They have reduced thecost of advertising across the supply chain, byfurther streamlining the transaction between
advertiser, publisher and consumer.
We estimate that the existence and use of
Google’s advertising technology platforms
across the advertising technology supply chain
directly supports 15,300 FTE jobs and$2.4 billion in GVA to the Australian economy
annually.21
This is generated through the use of Google
technology by advertisers and publishers
across the country. The direct benefits thatthey provide are not limited to industry, as
employment and value is supported across theadvertising supply chain.

[using advertising technology] has given[us a] platform to change the internal
narrative that [digital] marketing isinvestment for growth, not cost22

15,300 FTE
jobs
directly supported$2.4b GVA
directly supported
annually

This is greater than the direct GVA
supported by...

The entire Ships andBoating Manufacturingindustry in Australia23
and equal to the total GVA supported by...

The entire Advertisingindustry (including all
sources of advertising) inSouth Australia24

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The total value of the Google’s advertisingtechnology platforms in Australia is substantial
A computable general equilibrium (CGE)model which incorporates information on
linkages across sectors within the broader
economy was used to examine the potential
economy-wide impacts resulting from theeconomic activities generated form using
Google’s advertising technology products.
The economic value from the existence ofGoogle’s advertising technology platforms
goes beyond the direct employment andeconomic activity impacts within theadvertising technology supply chain, andincludes indirect (flow-on) impacts.
Macroeconomic Impacts
The existence of Google’s advertisingtechnology platforms stimulates economic
activity and raise aggregate demand in theAustralian economy.

$2.9 billion
Directly and indirectly contributed
to GVAThe current level of using Google’s platforms by
Australian businesses is estimated to havecontributed around $2.9 billion to GVA across allindustries when the indirect, supply chain
impacts are included.25 In addition to boosting
GVA, using Google’s advertising technology
platforms by publishers and advertisers directly
and indirectly supported 23,000 jobs inAustralia.26
Whilst there are significant indirect benefits
provided by Google’s platforms, the large
majority of its value is created directly. Google’s
platforms are widely used across Australia, andthe direct benefits are indicative of their value tothese businesses through their use of Google’s
advertising technology. The indirect benefits are
generated through the use of Google’s platforms
facilitating cost savings, time savings or
employment impacts. This provides businesses
with flow-on economic benefits that are
attributable to the effectiveness of Google’s
platforms.

23,000 FTE jobs
Direct and indirect

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Google’s platforms stimulate activity in othersectors upstream and downstream of theadvertising technology ecosystem
While Australian businesses are expected tobenefit from Google’s advertising technology
platforms, these impacts will vary acrosssectors.

Overall, it is estimated that the existence ofGoogle’s advertising technology platforms
supports over $1.6 billion in GVA across thesefour industries in Australia.27

These industry impacts provide anindication of the strength of the economic
linkages between the advertisingtechnology industry and other industries inAustralia.

In addition to boosting industry activity, Google’s
advertising technology platforms are also
expected to have led to higher employment
across all industries in Australia. Using Google’s
advertising technology platforms stimulates
activity in other sectors upstream anddownstream of the advertising technology
industry in Australia, and, in response, these
sectors demand more labour.

There are significant contributions toAustralian businesses from using Google’s
advertising technology platforms in theProfessional, Scientific and Technical
Services, Financial and Insurance services,
Manufacturing and Wholesale Trade. These
are the industries which also are found to havea higher number of jobs supported by theadvertising technology industry. Higher GVA
impacts in these industries is largely driven byadditional business activity and demand fortheir outputs as a result of using Google’s
advertising technology platforms.

The economic benefits of the advertising technology industry in Australia
PwC

The impacts of Google’s advertising technology
platforms on industry employment has a similar
pattern to that observed in the GVA impacts.
The gains in the workforce size and GVA due tothe Google’s platforms flows through to give an
overall $1.1 billion boost to Australia’s export.28

September 202120

4ReferencesReferences

1.
2.
3.
4.

5.

6.
7.
8.
9.
10.
11.
12.
13.
14.

15.
16.

17.

Estimated using PwC CGE Modelling
Estimated using PwC CGE Modelling
Estimated using PwC’s proprietary
Geospatial Economic Model (GEM)
Taken from PwC Survey of Business
Decision Makers in AdvertisingTechnology
Taken from “PwC Ad Tech Survey” ofBusiness Decision Makers in AdvertisingTechnology
Estimated using PwC CGE Modelling
IBISWorld (2021), Digital Advertising
Agencies in Australia
AlphaBeta (2020), Google’s Economic
Impact in Australia
IBISWorld (2021), Advertising Agencies inAustralia
IAB Australia (2021), Online Advertising
Expenditure Report
Estimated using PwC’s Geospatial
Economic Model (GEM)
Estimated using PwC’s Geospatial
Economic Model (GEM)
Estimated using PwC’s Geospatial
Economic Model (GEM)
Taken from PwC Survey of Business
Decision Makers in AdvertisingTechnology
ABS (2021), Australian Business
Performance by size
Taken from PwC Survey of Business
Decision Makers in AdvertisingTechnology
Taken from PwC Survey of Business
Decision Makers in AdvertisingTechnology

The economic benefits of the advertising technology industry in Australia
PwC

18.

19.

20.

21.
22.

23.
24.

25.
26.
27.
28.

Taken from PwC Survey of Business
Decision Makers in AdvertisingTechnology
Taken from PwC Survey of Business
Decision Makers in AdvertisingTechnology
Taken from PwC Survey of Business
Decision Makers in AdvertisingTechnology
Estimated using PwC’s Geospatial
Economic Model (GEM)
Taken from PwC Survey of Business
Decision Makers in AdvertisingTechnology
ABS (2021), Australian National
Accounts: Input-Output Tables
Deloitte Access Economics (2014),
Advertising Pays - The economic
employment and business value ofadvertising
Estimated using PwC CGE Modelling
Estimated using PwC CGE Modelling
Estimated using PwC CGE Modelling
Estimated using PwC CGE Modelling

September 2021
22

5

AppendicesAppendix A – Economic modelling

Approach to measuring Google’s
economic impact

Finally we estimated the number of jobs for relevant
occupations within the ad tech industry using the
updated 2019-20 industry-by-occupation matrix.

In order to estimate the number of jobs in the ad techindustry, we begin with analysing detailed information
about the employment by industry and by occupation in
the Australian economy. The Australian Input-Output
tables contain information on labour payments by industry
but contain no information on the pattern of labour
payments across occupations. This is problematic as
information on occupational patterns by industry is
required to identify relevant occupations and estimate thenumber of jobs in the ad tech industry.

Economy-wide impacts

The industry-by-occupation matrix from the ‘2016 Census’
which is the latest currently available from the ABS wasused to estimate the number of jobs in the ad techindustry. The 2016 industry-by-occupation matrix
represents the proportion of total employment accounted
for by each detailed occupation in each industry. The 2016industry-by-occupation matrix is the latest currently
available from the ABS as the Census of Population andHousing is conducted every five years. The Labour Force
Survey (LFS) on the other hand is released on a monthly
basis. The LFS is a household survey that provides
Australia's official estimates of employment andunemployment.

CGE models are widely used in economic analysis ofpolicies and projects around the world including inAustralia by both government and the private sector.

Given that an industry-by-occupation matrix for the mostrecent year is needed to estimate the number of jobs inthe ad tech industry, we used the latest LFS data and the
RAS method, which is well recognised and widely used in
updating input output tables to update theindustry-by-occupation matrix to 2019-20.

The economic benefits of the advertising technology industry in Australia
PwC

In order to measure the economy-wide impacts of thecontribution of Google’s ad tech platforms, we utilised acomparative static computable general equilibrium(CGE) model. A CGE model is a mathematical model ofan economy that is capable of capturing economy-wide
impacts and inter-sectoral reallocation of resources that
may result from a ‘shock’ (that is, a change in the statusquo) to the economy.

The core data of a CGE model is an input-output table.
An input-output table is a system of accounts whichshows, in value terms, the supply and disposal of goods
and services within the economy in a particular year. An
input-output table captures sales of products to otherindustries for further processing (intermediate usage) orto the various categories of final demand. It also
captures the inputs used in an industry’s production,
whether they are intermediate or primary inputs (suchas labour and capital). The table is balanced such that
total inputs to each industry are equal to total outputs
from each industry. Essentially, an input-output table is asnapshot of an economy (whether it is a region, state,
territory or country) in a particular year.

September 2021
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Appendix A – Economic modelling (Cont.)

The database is combined with sophisticated economic
and behavioural assumptions to capture:
●

●

●
●

resource constraints and the responses ofbusinesses and workers through the adjustmentof prices and wages;
substitution between labour and capital (andother factors inputs) in response to changes in
the price of labour relative to capital;
the behavioural responses of consumers,
investors and foreigners to price changes ; andthe effects of technological change and shifts in
consumer preferences.

The modelling was conducted using PwC’s
comparative static of the Victoria
University Regional Model (VURM), whichallowed us to examine state level impacts.
It is a CGE model of the Australian economy initiallydeveloped at Monash University and updated by PwC
that models short and long-run equilibrium of theAustralian economy. This CGE model is widely used by
the Australian Government, the Productivity
Commission and the Australian Treasury to quantify the
total impacts of a policy change.

These features of CGE models mean that they capture
not only the direct (or first-round) effects of an activity,
but also the indirect (or second- and third-round) effects.

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Appendix A – Economic modelling (Cont.)

VURM models the economy as a system of interrelated economic agents operating in competitive markets. Economic
theory is specifies the behaviour and market interactions of economic agents, including consumers, investors, producers
and governments operating in domestic and foreign goods, capital and labour markets. Defining features of thetheoretical structure of VURM include:●●●

Optimising behaviour by households and businesses in the context of competitive markets with explicit resource
constraints and budget constraints;
The price mechanism operates to clear markets for goods and factors such as labour and capital (i.e. prices
adjust so that supply equals demand); andAt the margin, costs are equal to revenues in all economic activities.

In estimating the effects of the contribution of Google’s ad tech platforms, we implemented a modelling scenario thatexamined the potential economy-wide impacts resulting from the economic activities generated form using Google’s adtech products. We employed an economic shock to represent cost savings, effectively making the industry more costeffective.
To examine localised economy-wide impacts, we coupled the CGE analysis with PwC’s GEM. By blending these two
approaches, CGE and GEM, we can look at what the impacts of Google’s ad tech platforms mean at a community level,
therefore allowing for a more tailored understanding of impacts. Using GEM, we allocated the National results to all SA2s
across the state.
Unless otherwise noted, all values in this report are expressed in $2019.

Flow chart illustrating the economic impact assessment methodology
Direct impacts Shocks

Model
inputsAnalyse thevalue of ad
tech activity

Economic
activity

Cost saving
Analyseoperational
impacts

from using
Google’s ad techplatforms

Report results

Model shocks

Computable
generalequilibrium
modelling(CGE)
Analyse direct
and indirect
economic
impacts acrossall industries.

Modelling
results

GVA

Jobs

Economic activity
in other sectors
upstream anddownstream of ad
tech ecosystem
The potential
economy-wide
impacts
resulting from theeconomic
activities
generated form
using Google’s adtech products

Business
growthresulting from using
Google’s ad techplatforms

The economic benefits of the advertising technology industry in Australia
PwC

September 202126

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