InformationNews

Google will become the prey, not the predator

Google will become the prey, not the predator

Google will become the prey, not the predator

>>> DOWNLOAD MP3 <<<

Although monopolies have a bad reputation, they are not always a bad thing. In the short term, modern monopolies are often a boon to consumers. They bring valuable new inventions to market and, in the case of platforms, they create new communities and markets that otherwise wouldn’t exist.

>>> LET EARN DOLLARS TOGETHER <<<

The downside comes much later, when the monopoly gets old and starts crowding out potential new competitors without bringing new value. As legal expert and author Tim Wu has said, monopolies “tend to be good to great in the short run and bad to terrible in the long run.”

Unlike the monopolies of yore, however, the platforms today are highly competitive. This difference results from the different mechanics of platform markets compared to traditional markets. The platforms compete not on their assets, but rather on their networks of users. Users today can migrate much faster than productive capacity could in the 19th and 20th centuries because they are locked in by the value the platform provides, not the assets it owns.

Therefore, a platform that dominates an industry is always vulnerable to attacks from platforms that have similar user bases. This process of platforms competing across industries is surprisingly common. For example, Amazon effectively created the e-book industry in the United States. Yet after Amazon proved itself in the market, Google and Apple left adjacent industries and became competitors. And, as previously reported, Alibaba has used its rapidly growing product market to attack Baidu’s dominance in product search.

Moreover, the speed of technological change today means that without government enforcement, modern monopolies are unlikely to last as long as their predecessors. Barriers to entry in most industries are much lower than they were a century ago, while the boundaries between industries are also much more fluid than they have been through the past.

Although networks create the strongest and most defensible moats today, they do not create the same barriers to entry as past monopolies that required large investments in physical infrastructure to succeed. AT&T’s dominance of the telephone industry lasted from the turn of the 20th century until its breakup in 1984. Unsurprisingly, in its later years the company delayed or killed many important innovations in an effort to prevent new entrants to enter the market.

Yet no platform today is likely to dominate an industry for so long. Start-up costs are rock bottom (thanks, it must be said, in large part to the effects of many platform companies). And today’s new businesses are able to grow faster than ever.

These changes mean that even if an industry is consolidated around a single dominant platform at any given time, there is always an imminent threat of entry by a new company or displacement by another successful platform. Due to the low cost of entry, this threat is constant and credible as it was not a hundred years ago.

This competition between established platforms and new entrants is exactly what happened to Microsoft. For much of the past two decades, there was even more concern about Microsoft as a monopoly than about Google today. In the early 2000s, most industry pundits expected major competition between Microsoft and Nokia to determine who would own the dominant smartphone operating system. Google’s decision to create Android was actually a response to its fear of Microsoft’s dominance in mobile.

Today, Microsoft is still the dominant platform in PC operating systems. However, it turned out that the kingdom he built was much smaller than everyone thought. The dynamism of platform competition has accomplished what the US government’s antitrust case in the late 1990s could not. Less than a decade later, Microsoft has become a small player in the mobile phone market. Apple and Google eclipsed its dominance as new technologies evolved and expanded the market in unexpected ways.

More recently, Google has come under increasing scrutiny from antitrust regulators due to its dominance in web search, particularly in Europe. But just a few years from now, Google’s dominance in search may seem far less than it does today. There are signs that this change is already underway. Although Google has long dominated digital advertising, it increasingly competes with platforms like Facebook, Twitter and Pinterest for advertisers’ money.

This competitive danger is particularly strong on mobile, since the vast majority of Google’s revenue comes from desktop search. Google’s creation of Android as a mobile operating system was intended primarily as a defensive measure to protect its search business, but the company still hasn’t found an ideal business model for the mobile web, where research does not monetize as well as it does. done on the desktop. Many analysts attribute the slowdown in Google’s search ad revenue growth to this shift from desktop to mobile.

Clicks on smartphones are simply not as profitable as those on personal computers. Additionally, new Chinese entrants that rely on open-source Android could threaten Google’s Android dominance in the near future. Meanwhile, Facebook has built a huge presence on mobile, and Google risks being eclipsed by the next set of dominant platforms. If it’s unable to extend its revenue engine to mobile — where the potential advertising market will ultimately be much larger than desktop search — it could also take a back seat within a decade.

Google could always try to buy up new competitors, like Facebook did with Instagram and WhatsApp. But large and repeated acquisitions will only encourage the creation of even more startups that will become future competitors. Google’s position in the market may seem insurmountable today, but that could very well change as the mobile Internet grows and mobile ad revenue eclipses that of the desktop Web.

How should governments respond to the growing dominance of platform monopolies? The historical perspective is important here. Long-lasting monopolies like Standard Oil and AT&T are what gave the term its negative reputation. However, in the absence of government protection, no company is likely to enjoy such an extended period of dominance today. As we saw with Microsoft in the 2000s and may see with Google over the next decade, the dominance of a modern monopoly in an industry belies the competitive threat it faces from competitors. adjacent areas and a constant onslaught of new entrants.

Governments should worry about the long term later. As John Maynard Keynes said, “in the long run, we are all dead.” The right answer is usually to let consumers reap the windfall of social and economic gains that new platforms are creating today. Most of these modern monopolies will not be dominant long enough for the downsides to materialize.

© 2016 Bloomberg L.P.

Tech

Do you find AfroNaija useful? Click here to give us five stars rating!



Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button