12 Comments

Summary:

One argument likely to play a role in the federal government’s antitrust case against Google is that the company’s market position is unassailable thanks to network effects and a number of other factors, and therefore it is literally unkillable. But is this really true?

A number of issues are likely to play a crucial role in the ongoing antitrust investigation into Google, including the question of whether the company is using its dominant position in a way that damages the market (which as we’ve described before is a lot harder to answer than it might seem). In addition to that, one likely argument will be the one that Chris O’Brien at the San Jose Mercury News tried to float this past weekend: that Google’s position is now unassailable thanks to network effects and a number of other factors, and therefore. the company is unkillable. But is this really true?

In his column, O’Brien argues that Google’s grip on its users is “as firm as it is invisible,” and tries to make the case that while there aren’t any obvious signs that Google has an unshakeable monopoly on search, the company effectively does anyway. To take the least convincing part of O’Brien’s argument first, he says millions of people have become habituated to using Google, and this makes it extremely unlikely they will ever switch — even if a better search engine does come along. O’Brien quotes search-industry analyst and Search Engine Land blogger Danny Sullivan as saying:

People can quit smoking any time, too, but they find it very hard to do it. If you’ve got that habit, it’s very hard to break it. People don’t just go over and start trying new things.

This would be a much more powerful argument if using Google was actually addictive in the same way nicotine is, but so far that isn’t part of the government’s case (that I know of). Still, Google has clearly become the default search engine for millions of people, to the point where its name has achieved the status of a verb and people talk about “Googling” something instead of searching for it. And O’Brien argues this can be a barrier to entry into the market because “inertia is a powerful force” (although upstart competitor Blekko doesn’t think it needs the government’s help).

Google’s search position has been declining

But does this mean Google’s position is unassailable, and no one will ever use another search engine? Hardly. Google’s search-market share is only at around 65 percent (depending on which traffic measurement firm you choose to believe), which proves at least some people are already using a different search engine. And not only that, but since Google’s market share has actually been falling recently — from the 80-plus percent level it commanded just a few years ago — we know this group of users has actually been growing fairly steadily of late.

It’s not just our desire to use Google that makes it such a dominant force, according to O’Brien. He argues that the search giant also has a couple of other unfair advantages — such as its massive, globe-spanning collection of servers. This physical infrastructure, he says, makes it virtually impossible that any competitor, particularly a small startup, would be able to match Google on search results and become good enough to draw away users.

If you could get the users and the momentum, it’s possible that some venture capitalists might pony up the money to build out infrastructure. But it would still take years to actually match Google’s current footprint.

There’s no question that Google has a massive server network. It won’t say exactly how many servers it has, but some estimate the number at close to a million, which is about 2 percent of all the servers in the world. So is that a barrier to entry that no one can breach? Possibly. But it’s worth remembering that when Google first came along, no one believed it had any hope of becoming as huge as it is now. Most analysts said the search market was wrapped up by AltaVista and the other big players like Yahoo, since the latter was a giant Internet player with deep pockets.

If there’s one good argument against this position, in fact, it’s Yahoo itself: The company that once dominated the web and was a major player in search is now adrift, without a CEO and thinking about splitting itself up for parts, having sold off its search business to Microsoft after admitting it could no longer compete. And Google certainly didn’t have millions of servers when it started.

All it takes to compete is a better algorithm

What did Google have? A bunch of math nerds and a really great algorithm combined with a completely different way of thinking about search. The company didn’t even have a business model (it would later copy one from a company that Yahoo wound up buying called Overture). Now look at the search market today: Although they’ve been drowned out by the “Google is a monopoly” camp, there have been repeated criticisms that the company’s search results are no longer as good as they used to be, thanks in part to content farms and other spam that makes it hard to find good results.

Google has taken steps to kill off some of these weeds clogging up its results, by improving its algorithm, but there are still criticisms that a raw Google search is not as useful as it once was. And what is becoming more useful are “social searches” that involve networks like Facebook and Twitter, which is one reason why Google has put so many of its resources behind Google+ and plans to make that network a core part of all its assets. In a nutshell, it needs to figure out how to become a player in social search before it loses even more ground to competitors like Facebook.

In the end, O’Brien — and many other critics of Google, including law professor Tim Wu, author of the book The Master Switch — also argue that the search giant is unassailable because it benefits from network effects that no one else can match. In other words, the more people use its search, the better its results get, and the more people come to see it as the default for searching, and so on. It’s a killer combination.

But are network effects a recipe for omnipotence? Not really. Obviously, they can be very powerful, and are likely helping Google maintain its market share, but if network effects were all that mattered, we would all still be using AOL and Friendster. Both had network effects that seemed unbeatable in their day, as did AltaVista and Myspace. They all toppled when a better solution came along, and — while it may seem incredibly unlikely — that fate could just as easily befall Google.

Post and thumbnail photos courtesy of Flickr users Stefan and World Economic Forum

  1. Don’t write articles about them then.

    Write articles about http://duckduckgo.com/ Firefox etc…

    It is easier to blank out a company , than you think.
    Yahoo for eg… last visited by me about 10 years ago.

    Share
    1. … which uses Google search results as well.

      Share
      1. DDG doesn’t use Google..

        Share
  2. Not to mention all their other products and services you don’t even mention – gmail, docs, calendar, chrome, android, youtube, maps, etc. The network effect certainly keeps more people within the Google ecosystem (myself included). And of course now Google+ which will eventually connect all of them.

    Share
    1. All those other products other than Android and Youube (which isn’t REALLY theirs) are VERY minor players in their respective markets. Gmail has barely more users than AOL Mail for crying out loud!

      Share
  3. oyyy, as my Nanna used to say. Where do we start with this, Matthew?

    You start out by pointing to the Senate investigation into Google, link to a bunch of other news sources as if to show the mounting tide arrayed against Google (can we have direct link to DoJ please); then you suggest that its hard to count market power, but don’t even try.

    You then offer some numbers showing Google’s dominance in the 65% range, falling, and proof that it is not unassailable. You forgot to mention that those are numbers for the US. For the rest of the world, the number’s in the 80-93% range (see below).

    The numbers available in contrast to what you suggest, are out there a plenty, and reasonably reputable, replicable, and of a piece so to speak. The number 65% you point to is for US; it flunctuates in a 2 percent band from month to month, but has stayed remarkably steady after plateauing at that level.

    Yahoo is not a good comparison because it never had the clout even back in the day, when the scramble for ‘portals’ had players a plenty. Infoseek anyone?

    The numbers for Google globally are typically in the 80 to 90 percent range, including low 80s here in Canada and as high as 93 percent in Australia. Trend at least until 2010 has been growing dominance, not lessening.

    Google is company non-grata in China, Japan, Korea, Russia. Monopolies there remain nonetheless. There is something about this area — and others, including FB — of the digital media that is prone to consolidation. That may not be illegal, but it is a signal to pay attention and that, generally speaking, the situation is less than ideal.

    And yes, monopolies/consolidation may be transitory, or short-lived — not immutable, as you mistakenly attribute to Tim Wu in his Master Switch. This is basic Schumpeterian innovation economics. You can misconstrue it all you want, but it ’tis all the rage, even amongst folks in your crowd. And even though transitory, monopolists/dominant firms can fundamentally tilt things — and them bury them in the metal (servers, search, networks) so to speak, for better or worse.

    When a dominant company like Google (or Facebook, or Amazon, or Apple, or . . .) dominate particular nodes in networked spaces — which, as you know from reading Zeynap’s work — are social spaces and market places, we need to do our utmost to see that things point more towards better than the worst.

    So, ya, we need to pay attention, and not bury our heads in the sand, and making up excuses as to why we should turn a blind eye to such an obvious phenomenon. After that, well, we can debate until the cow’s come home, but a few basic facts on the ground, reference to some historical cycles repeating (from methodless enthusiasm, to competition, to consolidation, ala W)), and presto, a recipe for a conversation.

    Btw, can you open up more space in your comment window for those of us who like to write more than two lines? cheers DW

    Share
    1. Dwayne,

      Well said .. who would have imagined that a tiny company like Google could possibly have challenged monsters like Yahoo? Or that an operation called Micro-soft led by a college dropout could be successful with IBM as its biggest customer? Or that some Finnish man’s hobby writing an operating system kernel could change the world?

      Stuff happens in this industry. Yep, weird.

      ps If you use Chrome, you can re-size the comment box to be any size you want.

      Share
  4. Google can take comfort in that basically there is no legal case against them. They’re products are free, the’re alternatives are also free so consumers are being harmed, also there no failure in the tech industry it’s actually thriving and start up valuation a bubbly high, there is also the reality any proposed “solutions” of having the government dictate search results does go against many existing laws. It’s a non issue that got politicized is all.

    Share
    1. Yeah..I thnk Google will continue to worry, considering you are completely ignorant. Their product is NOT free, becuase htey are being investigated in conjunciton with their ADVERTISING part…which costs money. And whne your execs are PROVEN to say “Well, if you don’t play ball with us, then we can just scrape your site from out results altogether” then they DO have a problem.

      What Google is accused of doing is EXACTLY (if not worse) than what Microsoft did. Which was to use their dominance in Windows to unfairly keep Netscape down. Giving unfair search result placement to your own sites or your partners’ sites (which involves money, moron) is the EXAT same thing as bundling Internet Explorer with Windows and telling Dell and Gateway that they can only have the OEM discount if they don’t bundle Netscape as well.

      Bottom line..you are not a lawyer. That is clear. So don’t embarrass yourself again and act like one.

      Share
  5. Google is as invincible as IBM was, or Microsoft was or (in the near future?) as Facebook might become. It is not always an algorithm (or technical superiority) that will usher in a new era. It could be convenience, user-friendliness, business model etc which play a big role in dislodging the current emperor. But dislodging is as natural as the seasons, the only question is how long can the emperor hold on, or if he can metamorphose into something new and desirable.

    Share
  6. Of course they can. If Facebook and Microsoft really teamed up to push Bing on the site, Google’s market share would drop a good 10% within a month or so. At that point, it would barely havea majority. And that 10% drop would be a HUGE blow to Google, causing them to have to abandon some more of their money draining services. Plus, that 10% would be just the beginning as more people would see what they have been missing with Bing (Like those studies you mentioned that showed that Bing was the better search engine) So Google would continue to lose more of its share. Maybe not to the point of ever dropping out of first place, but again. since 99+% of their revenue coems from search, it would effectively destroy Google who would have to decide whether or not they really wanted ot keep all their services that lose tens of millions of dollars a year going.

    Share
  7. i dont think anybody can compete with google cause google has google + google earth google sketup (witch i use ALOT) google maps and browers compare to any other web site including yahoo

    Share

Comments have been disabled for this post