It's a standard across the industry, pretty much since the beginning of SLAs.
They're not insurance, and not meant to compensate you if your business is disrupted. That's on you. (And there are many ways to protect your business from provider outages.)
SLA payouts are meant to be mildly punitive, and to align incentives -- in aggregate, the SLA payouts add up and can hurt Google if there are a lot of customers affected by frequent outages.
With that said... Maybe it's a good product idea, to sell varying levels of SLA violation insurance alongside the service covered by the SLA. The default, free level of insurance covers the cost of the service itself, as it does today, but perhaps a customer could buy premium insurance from Google that the SLA will not be violated, increasing the payouts to offset business risk. After all, who better to put a price on the risk than Google themselves? So probably, Google can offer a better price on offsetting the risk, than a third party insurer which doesn't have access to Google's internal data.
Selling insurance for SLAs seems to be an interesting idea, but this kind of insurance might be really similar to earthquake insurance, since violation of SLAs tend to be not common (otherwise why committing) but it might be a huge cascade failure once happens. Would you like to buy one? Earthquake insurance quirks all apply.
On the other side, Google has zero incentives to violate SLAs. A. You really cannot control how large the violation would be. B. Damage to branding >>>>>> money payout.
It seems to be the standard. The most generous SLA I've seen is 5% off the monthly bill for each 30 minutes of downtime (up to 100%). If I'm down for 10 hours, waiving one month of bills doesn't come close to the damage done.
An SLA seems to be more of a promise than an agreement, because if the service goes down you're SOL and the provider gets a slap on the wrist (partial refund).
My current ISP credits 5x - I was impacted in an outage expected to last all day, and they credited me 5 days on my next bill.
Now, such a service may be sold on the very high end... but in the general case, that's not what "Service Level Agreement" usually means.
(as an aside, I strongly suggest you get your business insurance from a party other than your service provider; serous outages can bankrupt service providers as-is... if they had to pay out customer damages, that would become a lot more likely.)
The SLA is the contract. While this may not be possible, you'd normally have to negotiate a higher payout for a higher service cost, but otherwise it's fixed based on the amount you pay, not on the amount your business makes.
"Partial refund". That's a very low standard for a service level agreement, but typical of Google. Your whole business is down, it's their fault, and all you get a partial refund on the service.
A service level agreement is really a service packaged with an insurance product. The insurance product part should be evaluated as such - does it cover enough risk and is the coverage amount high enough? You can buy business interruption insurance from insurance companies, and should price that out in comparison with the cost and benefits of a SLA. If this is crucial to your core business, as with an entire retail chain going down because a cloud-based point of sale system goes down, it needs to be priced accordingly.
See: [1]
[1] https://www.researchgate.net/publication/226123605_Managing_...