Sunday, January 07, 2007

Owning the starting point on the internet

Rich Skrenta has a thought-provoking post that argues that Google now has a monopoly on online search and advertising.

Some excerpts:
Google has won both the online search and advertising markets.

Google is the start page for the Internet. The net isn't a directed graph. It's not a tree. It's a single point labeled G connected to 10 billion destination pages .... [And] it turns out that owning the starting point on the Internet is really, really valuable.

Search engines have zero user switching costs .... Zero switching costs lead to a winner-take-all market for the leader. Even a modest initial lead will snowball until majority market share is reached and maintained. This is because, faced with a choice between two products, in the absence of switching costs users will choose the better one, even if it is only slightly better.

Even if a competitor such as Yahoo, MSN or Ask were to fully close the [technology] gap at this point, they would still have to overcome the final brand perception gap ... Market research shows that users who see Google's logo on top of Yahoo's results perceive the results to be of higher quality.

Users will stick with the leader ... Forces reinforce a feedback loop of success for the leader ... Advertisers will be drawn to the leader ... strengthening its lead .... All Hail the New King Google.
Rich goes on to argue that Yahoo and others should give up, accept their new Google overloads, and work with Google instead of against them.

As much as I like Rich's piece, I disagree with parts of it. First, there is a hidden assumption that all people have the same criteria for determining what is the best search engine. Despite the strength of the Google brand, I suspect it is more the case that different people have different preferences for user interfaces and different perceptions of the relevance of the search results. Preferences may even vary for the same person when doing different tasks. These are holes in Google's armor which, when pried open, could leave the giant vulnerable.

Second, I think it is actually Microsoft that owns the starting point to the internet, not Google. Microsoft owns the default operating system (WinXP), default browser (IE), default Office suite (MS Office), and often the default start page (MSN). While it is true that Microsoft has not yet been able (or willing) to use this to full effect, I would not as quick as Rich to say that PC software is irrelevant.

See also my previous posts ([1] [2] [3] [4]) on how Microsoft's control of the desktop could change the game in search.

3 comments:

AjiNIMC said...

Technology product always have a shorter life cycle. Google is not only the market leader but the market student (I think I just coined a new term :)). Google is quite nimble footed and experimenting newer methods every time. I have seen my colleagues searching Google in Google (evidence of a true starting point).

yahoo,msn and Google is same at the surface level but Google looks at the minute details carefully. I still believe that Yahoo and MSN can beat Google by catching the right vibe at right time (and for God sake before Google).

Some advices for Yahoo and MSN
-------------------------------
Work on integration of human intelligence with search. I have some ideas and will be implementing with hedir.com. Google has not got it right with coop. They are very close to perfection but still they are missing few things. I have worked on coop and it is a good way but still not the perfect. It is sad that they did not look at my suggestion of a weighted tagging system.

The next phase of search engines is integration and distributed search engines. Yahoo, MSN please get it right this year. Best luck.

Peter Davis said...

I think it's a huge stretch to say Google owns advertising. They've done a great job of serving up ads opposite their search, and they do a very good job of helping individual website owners make a bit of money with ads, but that's about it.

Kevin said...

Yeah.... agreed about MS but they're proving either unwilling or unable to execute.

They're building inferior products and ignoring the community.

They might own the starting point but they're not charging rent.