Don’t be evil … except when it suits

Perhaps the more accurate term is understand.

Google doesn’t like — or understand — short-term lenders, more commonly known as “payday” lenders. So it has decided to wage economic war on them by excluding their ads from its AdSense service. Which is a big deal because Adsense is the dominant vehicle for online advertising. If you are locked out of Adsense, you are effectively locked out of making money via advertising online.

But what’s Google’s beef?

So-called “payday” lenders are disparaged as usurious for charging interest rates that are higher than rates charged by traditional lenders, such as banks. But this is a facile criticism that betrays a lack of understanding about interest as well as the differences between a short-term loan and a 10 or 15 out 30-year loan.

Or even a six-year loan (like a car loan).

Short-term loans cost more because the loan is … shorter.

Sometimes, just for a week or so. Hence the “payday” reference. A person needs a quick loan to bridge a gap between today and payday. Banks and other traditional lenders do not make such loans.

And if they did, they’d charge interest, too.

This — charging of interest — is what short-term lenders are being excoriated for.

But why? Ever look at your home loan statement? How much interest does the average person pay over 30 years on a $250,000 principal? It may be “only” 5 percent — but check out the total amount you pay over that 30-year period: $483,139 — of which $233,139 is interest (see here). That’s a lot of interest — about as much interest as principle.

But Google isn’t calling bank lenders “predatory” — or blacklisting them from Adsense.

And in defense of banks, you’ve got use of their money (which bought the house) for 30 years (the duration of the loan).

With a short-term loan, you are only using the lender’s money for a brief period. Which is why the cost per day seems to be higher. Complaining about a 25 percent interest rate on a loan that’s only for a week is like complaining that it costs more to rent a hotel room for a weekend than it costs to make a monthly payment on a 30-year home loan.

Have you ever heard outraged keening wails over the “predatory” pricing of a night at the Marriott?

People kvetch about the $5 cokes in the mini-bar, but accept that it’s the price of convenience. And the same’s true of short-term loans.

Anyone who has ever applied for a conventional loan knows that if you need the money right now — or even next week — the odds of getting it this way are as likely as winning the Powerball. The paperwork is labyrinthian; the process Byzantine.

Contrast this with the convenience of the short-term lender. One presents a pay stub as proof of income (or, in some cases, provides documentation of an asset to secure the loan, such as title to a vehicle) and within minutes, one has the cash.

Like the $5 can of Coke in the hotel mini-bar, you’ll pay more than you would have if you’d taken the elevator to the lobby, walked down the street to the store and bought a can of Coke at the 7-11.

But is it wrong for the hotel to charge you $5 for the mini-bar Coke?

Google seems to think so. And also thinks its ok to financially shiv a business it doesn’t like. Kettle, black anyone?

Keep in mind that short-term lenders aren’t forcing anyone to do business with them. They offer a service — and convenience. Like checking into a hotel on the spur of the moment and availing yourself of the $5 can of Coke in the mini-bar, it’s an expense people freely choose to assume in exchange for the service provided. For the convenience offered.

But Google won’t be banning Marriott ads, either.

It will, however, ban ads from short-term lenders effective July 13. It claims these businesses are “deceptive” and “harmful.”

Well, where is the deception?

Can anyone trot out evidence of fraud? Are the short-term lenders not up-front about the fees they charge for the service they provide? Or is it a question of Google not liking the services they provide?

See that business about “harmful.”

One could just as easily turn that around and accuse Google’s near-absolute control of online advertising via its Adsense service as “harmful,” too. It is harder to obtain website advertising outside of the Adsense universe.

Because virtually all major advertisers have a deal with Google and only advertise via Google (Adsense).

Yet, like short-term lenders, Google Adsense appeals because it offers a particular service that no one else does — or offers a better service than others do. Is that “predatory”? Adsense — like short-term lending — is a legal business and — crucially — it is not a legal monopoly business. Google can’t force anyone to advertise via Adsense — and businesses are free to place ads outside of the Google universe, working directly with web site publishers (cutting out the Adsense middle man).

Just as people are free to seek needed cash outside of the short-term lender universe. Or buy a can of Coke from 7-11.

Google’s moralistic tub-thumping is cloying because it’s ignorant and hypocritical.

Blackballing businesses they don’t like — or understand — is certainly their right.

But it’s not good business — or good karma. Especially in a world where the government decides who is — and isn’t — a monopoly.

Eric Peters is an automotive journalist and author. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.