Wednesday, August 25, 2010

Taxing blogs and hurting Google

The Paypal donation button on the top right of my blog is more a social experiment than a serious attempt to make money. I learned a lot about donations and blogs since I have it, for example that if I really wanted to make more money from it, I would have to write posts regularly that ask for money. I recently mentioned that I hadn't received any donation for months, and promptly got two donations. This post might also cause a few donations, although that is not the purpose. Instead I would like to discuss the future of the general idea of making money with a blog.

Last week the Philadelphia Citypaper reported that the city of Philadelphia slapped a $300 tax on all bloggers with any income, even if one of the taxed bloggers could prove that his total income over the last two years was $11. City officials squelched all protests with the advice to "hire an accountant", which of course isn't feasible, because it costs more than the tax. A blog with *any* form of income is considered a business, and thus has to pay $300 for a "business privilege license". It is easy to see how that idea could spread. Most places have some sort of business license, and could easily apply that to bloggers with some sort of income from ads or donations without even having to change any laws.

Now making $300 with a blog is not easy, and the large majority of blogs with Google ads or a Paypal donation button is making less than that. Thus faced with the choice of either paying $300 or removing the ads / donation button most people would choose to "go out of business". I would. While in principle one could try to get out of paying such a tax by declaring ones blog a non-profit organization (hey, I spent my donations on the games I write about), the administrative effort and cost involved will probably again be higher than the potential income from the blog.

Now a blogger with $11 income being asked to pay a $300 business license sounds very much like a funny little fringe story with no further importance. It's not even a "freedom of speech" story, as nobody would be forced to stop blogging, they'd only have to remove their source of small income. But in the long term that means that the only sites with ads or donation buttons in the future will be those which are certain to make more money from that than the cost of the business license. And one company is going to lose millions of dollars over this: Google.

Google makes a lot of money with Google AdSense on all sorts of blogs and small website. Not only do they take a large cut from what the advertiser pays, they also only pay out money when the accumulated income exceeds $100. Which means there are a lot of sites out there which never saw a cent for their Google ads, while Google at least got a handful of dollars for each of those sites. To the owners of such unprofitable blogs, removing the ads will make no difference. To Google it is a threat to a major part of their business model. The internet advertising business is all about making a few bucks each from millions of websites, not making large amounts of money from a single website. Threatening each of those millions of websites with a $300 business tax will kill the internet advertising business as we know it. Depending on your political leaning you might consider that a good thing. But for Google and all those bloggers who made a small amount of money on the side this certainly isn't good news.

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