Author: Marc Fawzi
License: Attribution-NonCommercial-ShareAlike 3.0
(first published on July 10th, 2006, updated Feb 9, 2009)
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Given the growing feeling that Google holds too much power over the future of the Web, without any proof that they can use that power wisely, and with sufficient proof to the contrary1, it’s easy to see why some of us are growing increasingly worried about Google’s continued drive to embed itself in all aspects of the Web.
In the software industry, economies of scale do not derive as much from production capacity as from the size of the installed user base, and that’s because software is made of electrical pulses (or bits) that can be replicated and downloaded by the users, at a relatively very small cost to the producer. This means that the size of the installed user base replaces production capacity in classical economic terms.
So far Google has managed to build a dominant market share in search based mostly on the strength of its technology, not by leveraging an installed user base as Microsoft had done with desktop applications.
However, this is changing as Google leverages its dominant market share and brand to move into the browser space, by co-funding Firefox (where Google search has been the default search engine) and now by launching their own browser, Google Chrome, which uses Google as the default search engine and includes a hidden installer for Google services on the desktop.
This represents a fork in the road for the Web, with Google moving to leverage its dominant market share and brand to create an installed user base (just as Microsoft had done with Windows) on the desktop and mobile devices with which it can dominate every application category it wishes to dominate, similar to how Microsoft dominated the desktop applications space.
While Google’s leveraging of its market share and brand to secure this unfair advantage is legal (except for the hidden installer for which Google may be liable) the advantage itself remains an unfair one, with the consequence being that Google will dominate the mobile phone, the desktop and the Web, all at the same time, which will greatly stifle innovation by making it harder for competitors to sway users away from Google.
One could argue that the patent system protects smaller companies from having their products and innovations copied and co-opted by bigger competitors. However, during the Microsoft dominated era, very few companies succeeded in suing them for patent infringement. I happen to know of one former PC software company and their ex CEO who succeeded in suing Microsoft for $120M. But that’s a rare exception to a common rule: the one with the deeper pockets always has the advantage in court (they can drag the lawsuit for years and make it too costly for others to sue them.)
For companies competing against Google , it’s not any better or worse than it used to be under the Microsoft monopoly. But for us the people it’s much worse because what is at stake now is much bigger. It’s no longer about our PCs and LANs, it’s about the future of the entire Web.
Thus, given that Google is perceived as a growing monopoly, which many see as having acquired too much power, too fast, without the wisdom to use that power responsibly, I’m not too surprised, in retrospect, that so many people have welcomed the Web 3.0 vision.
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1. What leaps to mind as far as Google’s lack of wisdom is their cooperation with the Chinese government in oppressing the already-oppressed (see: Google Chinese censorship.)
Related
- Wikipedia 3.0: The End of Google?
- Beyond Google: The Road To a P2P Economy
- P2P Energy Economy (active project)
Update
Tags:
Web 2.0, Google, Monopoly, Trends, economies of scale, innovation, Startup, Google Writely, Google spreadsheets, DabbleDB, Google Base, Web 3.0
Google is large and influential. That doesn’t make it a monopoly.
They have 39% market share in Search in the US – http://searchenginewatch.com/reports/article.php/3099931 – a lot more than their closest competitor, but it’s wrong to describe them as a monopoly. A monopoly has a legal entitlement to be the only provider of a product or service. More loosely, it can be used to describe a company with such dominance in the market that it makes no sense to try to compete with them. Neither apply to Google. I think your correspondents are simply reacting against the biggest player because they are the biggest, the same way people knock Microsoft, Symantec, Adobe, etc.
Certainly, Yahoo!, MSN and Ask Jeeves, etc. aren’t ready to throw in the towel yet. Arguably, if they were struggling, and I don’t know if they are, DabbleDB would need to differentiate a little more against Google to make their model work as a business. I am not sure they need to.
One last point, there isn’t a finite number of people looking for spreadsheets, etc., online. It’s a growing market with enormous untapped potential. The winners will be those best able to overcome the serious objections people have towards online apps – security & stability. Spreadsheets and databases are business apps – it will not be good enough to throw up something that is marked beta and sometimes works and might be secure. I think people dealing with business data *want* to pay for such products, because it guarantees them levels of service and the likelihood that the company will still be around in a year.
If MS and Interactive Corp. are having to struggle against Google then how can any small company compete against them?
Google’s economies of scale cannot be matched so easily, except through P2P subversion of the centralized search engine model.
It’s getting tough out there because of Google’s economies of scale and their ability/willingess to copy-and-co-opt innovations across a broad segment of the market.
Ian wrote:
“A monopoly has a legal entitlement to be the only provider of a product or service.”
Response:
The definition of Monopoly in the US does not equate to state run companies or any such concept. It comes down to the concentration (and consolidation) of power.
Don’t forget that Google prevents AdSense publishers from using other context-based advertising services on the same pages that have AdSense ads.
[...] impact it has over a worldwide, super-connected tool like the Internet. An article by Marc Fawzi on Evolving Trends expressed this effectively [...]
[...] with existing and growing economies of scale is what makes Google a monopoly,” states Evolving Trends. As Google grows, many smaller companies will die. In order to set up its monopoly, Google is used [...]
Contrary to what the Google fan club and the Google propoganda machine would have you believe, Here are some real facts:
- People do have a choice with operating systems. They can buy a MAC or use Linux.
- Google has a terrible tack record of abusing its power:
- click fraud lawsuit where they used a grubby lawyer and tricks to pay almost nothing.
- they pass on a very small share to adsense publishers and make them sign a confidentiality agreement.
- They tried to prevent publishers from showing other ads.
- Google Adsense is responsible for the majority of spam on the Internet.
- Google has a PR machine which includes Matt Cutts and others, who suppress criticism and even make personal attacks on people who are critical of them. They are also constantly releasing a barrage press releases with gimmicks to improve their image with the public.
Wake up people. Excessive power leads to abuse.
I think this is a really important discussion which has been started here, thank you Marc.
I got suspicious today when I heard about MS wanting to take over Yahoo! – or will it be Google…
Anyway, this is really crucial stuff here, it’s the much praised freedom of the information age and hence the real hope for a truly open world which is at stake here, I hope there’s some degree of acknowledgment on this.
So to feed the discussion more,
- what can we do as users?
- are there alternative independent search engines out there?
- should we think of starting new strategies in information retrieval?
- what ideas are around?
Is there a good active community somewhere discussing these issues? would be interested in participating…
thank you
fabio
[...] You’re better off annotating Wikipedia (using Semantic MediaWiki) and applying your knowledge of a given subject (or domain) to build intelligence into Wikipedia, which is owned by the people (as a non-profit, people funded, people powered encyclopedia.) Why be a squirrel in Google’s squirrel wheel only to have Google abuse your good will? [...]
“Why be a squirrel in Google’s squirrel wheel only to have Google abuse your good will?”
Good point.
[...] of doing business will rise. This view of the new world of work worries some, who say that this opens the door to monopolization of a business necessity (by Google, of course…), and additionally will have the effect of [...]
[...] a monopoly” or “monopoly google” you will get the Evolving Trends article “Is Google a Monopoly?” as the first result. It’s been like this since I published the article two years [...]
It is a monopoly, but it is incorrect to compare it to the types of monopolies in the past. Things like “competition is just a click away” indicate a misunderstanding or an intent to deceive. The reality is, is that online monopolies are new and there is nothing quite like them. I have thought of this every day for about two years (not full-time ; ) ). This is the model I discovered:
1) Google controls the ad space
2) Google can “out monetize” any “internet service” by using their superior ad inventory
3) “internet service” does not include retail/commerce product-related sites
4) Google can therefore out-compete any up and coming web service
5) The money Google makes from the ads goes back into improving the service
6) The ads strengthen their other services, and the services strengthen their ads
7) The more services that display their ads, the more advertisers they get, and the more they can monetize services
8) Their strength grows unbounded in a feedback loop
9) The monopoly of the network is quite different and arguably superior to monopolies of lore, notably desktop/software monopolies
Examples:
Take the search space. Their ad dominance gives the funds to improve their search relevance, which grows in popularity and thus feedback into the ads.
Now they are seeking to beat wikipedia using knol, and their ad market dominance.
In my opinion, and I am no expert, this is potentially a monopoly like no other monopoly.
Thanks for the comment.
It’s incorrect, IMO, to say “unbounded” when the ad market is finite.
Look at the logistic map for population growth (e.g of a species of fish.) The feedback is non-linear. If something grows too fast for it’s environment the feedback loop brings it down violently as the system overcompensates.
Anti-trust laws (sometimes) help save rapidly growing companies like Google from themselves by effectively stabilizing/dampening their rate growth.
No such thing as infinite growth in a finite space. So, other than the obvious difference that Google is online and previous monopolies were offline I fail to see why Google can’t be compared against say Microsoft in the mid-90s.
I’m glad we both agree that Google’s case is more significant even though we differ as to the wording of it.