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'Google Is As Close To a Natural Monopoly As the Bell System Was In 1956' (promarket.org)
An anonymous reader quotes a report from ProMarket: In terms of market share and profit margins, the big digital platforms, particularly Google and Facebook, enjoy an astounding level of dominance. Google, in effect the world's largest media company, has an 88 percent market share in search advertising. Facebook (including Instagram, Messenger, and WhatsApp) controls over 70 percent of social media on mobile devices. Together, the two firms received 85 cents of every new dollar spent in online advertising in the first quarter of 2016. Amazon has an over 70 percent share in the e-book market. Along with Apple and Microsoft, they are now the most valuable companies (in terms of market capitalization) in the world. The rise of digital platforms has had profound political, economic, and social effects, not least of which on the creators of content. While the internet brought immense benefits to consumers of content, the so-called "creative class" -- authors, journalists, filmmakers, musicians, artists -- has been particularly ravaged by the digital economy. This ravaging, and its roots in the monopolization of content delivery and data in the hands of a few digital giants, are at the heart of the new book Move Fast and Break Things: How Facebook, Google, and Amazon Cornered Culture and Undermined Democracy by media scholar Jonathan Taplin. In the book, Taplin explores the way in which the internet came to be dominated by a handful of monopoly platforms, and the subsequent capturing of regulators that has since all but ensured their dominance would not be challenged in court. In an interview with ProMarket, Taplin said in response to a question: "I would say Google is as close to a natural monopoly as the Bell System was in 1956. If you came to me and said 'Hey, I want to start a company to compete with Google in search,' I would say you're out of your mind and don't waste your energy or your time or your money, there's just no way. Classic economics would say that if there's a business in which there are 35 percent net margins, that would attract a huge amount of new capital to capture some of that, and none of that has happened. That tells you there's something wrong."
I've been saying this for years. When I started, people, even techies, still thought google "[did] no evil." I can't imagine anything will be done about this. Google will be intertwined with government in no time; they practically are now.
I'd really like to know.
capturing of regulators
Exactly! Just like in transportation, energy, and other forms of communications. And aren't we the ones that vote for the 'regulators'? Don't blame Google for winning. Look to yourselves to vote for open markets. Vote the captured regulators out.
“He’s not deformed, he’s just drunk!”
Yes, they do have hundreds of thousands of rack-mounted servers in data centers around the world, but so does Amazon, and companies can rent virtual servers in them.
AT&T provided universal point-to-point phone service. There was just no way to compete against that until a Federal judge broke up the company in the early '80s (sure, the Internet with VOIP might've done the job, but that came more than 10 years later).
Who's to say that Google's search bar and query results, accompanied by targeted ads, will be good enough for the public ten or even five years from now. There's plenty of room for innovation and entrepreneurship. I'll bet Jeff Bezos has more than one pet project aimed squarely at Google search right now.
People in 50s had to use Bell or no telephone system at all!
With google just the opposite. Mint makes it a struggle to set your search to google. They force Yahoo on you. MS products push Bing on you. I really have to go out of my way to use google.
People choose google, because they like it , not because of some monopoly influence.
This is why such businesses are considered utilities and subject to different rules.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
Ma Bell got broken up as a big bad monopoly in the early 1980's. If Google is being compared to Ma Bell in 1956, I guess it'll be a while before Google gets broken up as well.
Natural Monopoly is a term for when two equal-sized companies doing the same thing would have near double the cost of a single company doing the same thing, and costs drop as market share increases. A Telephone company is a natural monopoly because if every person was a customer of ATT and Verizon both, then both companies would roll out infrastructure to all of the customers, duplicating costs. If ATT had 100% of the people as a customer, then Verizon would have an insane incremental cost for the first customer.
Also, in the Telephone example, but not explicitly required for a natural monopoly (because government regulations usually prevent it), is that network effects make the company with more people stronger. Telephone companies predate exchanges. So if you were on ATT, you couldn't call someone on Verizon. So if everyone you knew was on ATT, the value to you for a Verizon connection that wouldn't let you call anyone you know, would be worthless. And would cost Verizon more than an ATT connection would.
So the market would naturally drift to a monopoly.
Google can have a startup take over tomorrow. They aren't doing anything in search that some guy in a garage can't do. They scrape sites, give results.
Google is more a benevolent abusive monopoly. But because that doesn't exist, it sounds more like people are abusing well-defined words, rather than using the right words. Google's browser feeds their search results. Google's ads feed and are fed by browser and search results. That's not a "natural monopoly", that's an abusive monopoly. That they don't "require" people use their services, like MS/IE, but people still choose to do it, because they are the only option. That warrants a new term, I dub it "benevolent abusive monopoly".
Learn to love Alaska
I'm not following this argument. How does being large and popular equate to being a monopoly? Ma Bell had to run wires everywhere, Google just uses the existing infrastructure. No one's forcing you to use Google and there are plenty of other search engines.
You also don't need a lot of capital to compete with Google if you want to build your own search engine. Cloud servers are damn cheap these days compared to putting something in a colocation facility like you used to have to do. If you're doing something niche like shodan.io it makes complete sense to go ahead and build your own.
That will teach Google a lesson, we advertisers can boycott and cease online advertising. Sure most of us will go out of business, but I suppose the ones that can't offer customers quality products and services will be the first to collapse in a zero advertisement economy.
“Common sense is not so common.” — Voltaire
Because it costs me a fortune to use Google and i have to lease a big black Google machine from the company to do it.
The difference: You don't subscribe to google. You don't pay for Google. Google shows you ads (if you aren't using tools to avoid them) to make their money, they don't get the bulk of their income from folks paying for access to services, but by advertising through those services.
Google is not a natural monopoly in the classic sense - they are widely popular, but they don't exist as an unavoidable gateway to essential services like the phone companies in the previous century.
Instead, they provide optional services through a public network, and tend to be less objectionable than the alternatives, so people use them.
I'm personally often against a LOT of the actions of corporations in the world, and even against Google's decisions sometimes - but they don't even approach Ma Bell in the terms presented here.
Ryan Fenton
I highly disagree. You think it is a monopoly because that is what everyone uses, but everyone uses it because they set a standard in usability and customer satisfaction and doing so much more for the customer than any other company they compete with, at no real extra cost. Noone else delivers the same quality of service that Google does, and everyone complains it isn't fair.
Google entered when there were so many MORE search engines. Most of those died years ago. I used dogpile because it coordinated the best results. Then google came along and did one better. Now google is the top of the game, not by cheating the system or forcing people to use their product.
Reliability, high quality, and awesome features/functionality. That brings the customers who stay.
Switching away from google requires just setting a different default search engine in your browser that would cost you a grand sum of zero dollars and zero cents.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
I use duck duck go as my daily search engine. I use gmail and android but both could easily be switched out. Facebook? Never had an account, never logged on.
In the past there was no way to avoid the Bell System if you wanted a telephone, and you had to have a telephone.
or more precisely "classical economics meet complexity credit" - where "complexity credit" is an asset account meant to quantify the opposite of "technical debt".
The idea is, company A has built a massively complex information infrastructure, with good design and architecture which enables scaling and adaptation/innovation. That has a kind of a compound-interest-accumulating piling of capability value upon capability value.
Consequently, they can efficiently build and rapidly improve an interworking set of best-in-class applications, providing value for end users that companies that cannot leverage the layers of google tech below cannot match, and innovating those valuable tools faster and better than other companies.
This is just a few good ideas and great execution. So that leads to market dominance based on merit and customers voting with their feet / touchpads.
How is this kind of production of a monopoly through merit in an open playing field meritocracy a bad thing?
If it is a bad thing, what should be done about it that wouldn't cripple the applications/services that their customers apparently want and enjoy?
Where are we going and why are we in a handbasket?
More importantly what are the natural barriers to entry that google presides over?
Last mile? No.
National interconnect? No.
Vertical or horizontal ownership of key resources? No.
Insidious patent, copyright, license or arbitrary government backed anti-competitive government sponsored meddling? No more than everyone else.
In fact how many search engines where there before google? Remember all the add ridden, crap infested search engines of the late 90s?
Google has a good product we voluntarily want. It also has a lot of data gained from its masses of users that help it provide relevant searches, but that it has to balance against various sponsorships and clickbait crap. It has a good S:N versus competitors like Bing, which is mostly crap most of the time.
Not really. At the time there were a lot of players with small marketshare operating in a contestable market (much lower entry barrier than they would face today). That project was destined to be funded. Today, a startup looking to compete with Google on search is doomed, even if they have a brilliant idea.
I don't think Mr. Taplin knows what a natural monopoly is.
Note: It is not a market share gained through the neglect of anti-trust.
Whoever wrote that "if there's a business in which there are 35 percent net margins, that would attract a huge amount of new capital" must have never worked for any larger global corporation.
I have been working for parts of such corporations that were sold off because we only had a margin < 50%.
Never underestimate the greed ruling investors.
In fact, the exact opposite is true: there has been a massive increase in free news sites, and people are picking those up. Companies like Google and Facebook (so far) haven't been gatekeepers. Taplin's CV reads like a who's-who of big, evil old media and financial corporations. What actually bothers him is that their monopolies are being eroded.
And what takes the cake is that Taplin blames "antidemocratic, monopoly-oriented, radical libertarianism values of the titans of technology". Most Silicon Valley tech CEOs are in bed with the Democrats and supported Obama and Hillary. Anybody who espouses libertarian values in the Valley has the Silicon Valley techie mobs and the federal government come down on them like a ton of bricks; just look at what happened to Thiel.
Taplin argues not for democracy, but for the old, crony-capitalist system that made him rich and powerful, nothing more.
I haven't, for years... I use duck duck go. works for me.
You are not Google's Customer! The advertisers are. From the advertisers perspective Google is a monopolist. Excluding apps made by Facebook, adwords is the only place I can reasonably advertising on the general web. Yes there are other companies but the advertising industry favors one monopolist. If I create a website I will sign up with Google to get ads for my site because they are the biggest and it's just not worth my time using someone else. Since most websites only get ads from Google then advertisers only use Google.
You answer your own question but can't spot why so let me explain. Google has a critical mass of users that provide DATA on the best search results. This makes a perfect catch22 for any competitor, to get better search results they need more users than google but they can't get more users UNTIL AFTER their search results are better.
Classic economics would say that if there's a business in which there are 35 percent net margins, that would attract a huge amount of new capital to capture some of that, and none of that has happened.
Sounds like someone found out what talented individuals can bring to the table. The competition cannot compete by reducing costs, they must become technologically on par or superior to compete. Google is not perfect, but they focus more on quality than nearly anyone else. Never give up quality for speed. When you focus on quality, you get speed for free.
Like I said, they're not perfect, they're just much better than the alternatives, and in many cases, quite good.
In fact, it's the very opposite: Edge starts automatically, is configured to search with Bing by default and they even have the nerve to say one won't be able to choose Google in a future Windows version.
Besides, the competition is there. Why does not Bing catch on? Because M$ is monopolistic and we're fed up with it. Punishments by the EU didn't cure it, punishment by the USA didn't cure it, it seems it's in their DNA.
Complaining about Google is like complaining about a weather forecasting site. If they nail it, you come back because it works. Of course, the competition want to get business without the need for accurate forecasts (because that's hard), and thus we have to endure the complaining of the incompetents.
Just do a good job and sell it for a reasonable price; don't resort to anticompetitive tricks because people will remember and not use your products anymore (do you hear, M$?)
You think that Google will be eternally the most successful? Wait a little bit, China(*) is coming. Oh, did you think they were not into trying to make money with search? Think again.
(*) Just an example. Russia, the EU or even UK are posed to try their hand at it.
It was much easier to build a better Myspace than to build a better Google. Facebook did it on a shoestring budget. A Google competitor will need big funding just to get the hardware necessary to show a POC, and nobody will fund it without seeing a POC.
I for one, love my Chrome browser and gmail.
Winston Smith loved Big Brother by the end of the book, too.
A few months ago Google stopped letting me use pop.google.com for two Gmail accounts at once with my Sylpheed email client. I can still log onto the google.com web portal to read the mail on the second account.
At that point in time I decided Google was being too controlling. I actively went out to find a robust commercial email provider who would charge me a few dollars a month for unencumbered and non-data mined email service. There are such providers out there, and it's worth it.
And there is the problem that even if a group did come up with a system that looked like it might be a viable rival/threat to Google,what would happen..
Their backers would have the normal lack of patience and would either sell out straight to alphabet/Google or a huge ipo which alphabet/Google would then take a few years getting control of enough stock/shares that they could take control.
Unless some already madly rich Corp/individual was in charge,it wouldn't take long for a/g to gain control..
How do we know that there have been several possible competitive systems thought up but then have taken the easy option of selling out to a/g ?
It seems to be an easy way to get lots of cash today,come up with an idea that might possibly threaten one of the big boys and just sell out to them,much easier than all that work/money to actually turn it into a real threat in ten years time..
Regulation only work if regulators are honest,intelligent,un- corruptible and working in a system/gov that's allows them to do their job properly..
The UK had some very strict rules/laws before the 08 crash governing banking etc,but regulators WORKING staff seems to have been three young students in an office as far from London as possible,so regulation was never going to work..
I loathe Google,but there is realy no VIABLE alternative,as others pointed out,its a catch22 situation..
One that just searches. Not history with select US political parties. No US SJW issues. Just search the net and present the results.
Hardware is cheap. Networking is low cost. The experts with the maths and code skills can be found at a few good universities around the world.
Domestic spying is now "Benign Information Gathering"
Good comment and deserved the insightful mod, though I don't fully agree with your definitions. Also, I was once again disappointed by the lack of funny-moderated comments. Where have all the wits gone?
I'd prefer to approach it from the perspective of a counterexample. What if the google was cut into competing pieces. Each piece would start with a copy of the data and source code and an equal share of the physical resources. Would one of the pieces naturally grow to the point of destroying all others, or could they continue competing indefinitely? (Old example involves Microsoft. Imagine three baby Microsofts that each started with the source code.)
I'm not sure how it would work in the case of the google, but there is obviously a paradox here. Google is profiting by helping other companies compete against each other. It might work, but only if the google was a fair and impartial arbitrator. If you prefer, "not evil".
The paradox seems unavoidable because the google is a PLAYER, not just an neutral party. The google is trying to extract as much money as possible from the system. Rather than wanting each of us to get the best possible information about what we want to buy, google's thumb is on the scale. "Which companies will pay the highest percentage to the google?" becomes part of the equation and if you could see the secrets of PageRank I'm certain that you would find that code somewhere in there. Ties have to be broken, and ceteris paribus the google corporation obviously wants to break the ties in its OWN favor. (Of course it's even worse in cases where the google is actually selling one of the products or services. Anyone still think they can offer a competing map service against Google Maps?)
Solution? Use tax policy to INCREASE FREEDOM, not to make the rich richer. There should be a progressive corporate tax based on market share. As you eliminate your competitors, your taxes rise, and then you get a big tax bonus if you cut your company into competing pieces. SINCERELY competing pieces, not just such scams as dividing up the territory.
The extra tax revenue from these market share taxes should be tapped to support the government service of regulating the dominant company (especially in cases where the dominator really has a natural monopoly) and researching ways to break any natural monopolies (especially with new technologies that monopolists naturally want to resist).
Freedom = (Meaningful - Coerced) Choice != (Speech | Beer^2), and sad sock puppets' bad mods avail them naught.
Hardware/bandwidth is a set of AWS instances away, enough for any sort of demo needed. Heck, if someone had an actual break-through idea, Amazon or Bing would probably fund them enough up front to prove it out.
Either way, a POC to get funding doesn't require that much. Plenty of groups spider the web without too much. For a POC, they wouldn't have time constraints for refresh, or even need to deliver performance to the world like Google does, as long as they can demonstrate whatever it is which makes their version better, that's enough to get funding from lots of interested competitors.
The party of stupid and the party of evil get together and do something both stupid and evil, then call it bipartisan.
It's impossible to say what it's going to take to make a Google-killer, it's obviously going to involve huge resources and AI. The barrier to entry and uneven access to the tech make it impossible for a start-up in my opinion. Maybe China will make one. Or maybe you're right and a couple of harvard kids will, but I doubt it.
As a lot of people have pointed out, Google does not have a monopoly. They have a huge chunk of the market, especially in Europe where it's up to 90 percent, and bing is more or less non-existent. I could choose Bing or other search engines in a matter of seconds if I want to, but I simply doesn't, because they are sub par search engines. They don't provide the same value for me. http://www.market-inspector.co...
It's kind of strange to see this discussion about Google being a monopoly, and the comparison to Bell. To me, they are completely opposite. How much do you pay to search on Google? Nothing, you're not a customer, you have no business relationship with them. Bell was a monopoly because it monopolised the market, ie. the group of customers who paid for their product. How is that anything like Google, who gives you search for free?
Rather, Google's customers are their advertisers. Do they monopolise the advertising market? No, not by any stretch. How about online advertising? I don't think so. How about advertising on Google? Well yes, they do have exclusive rights to sell that, but were Yellow Pages a monopolist because they were the only ones who could sell advertising in their directory?
Google do have a great search engine which 80% of the world uses. But since no one pays, the so called search market isn't a market at all.
No one in the thread has said this:
Although I know that Google is not a monopoly, I am not interested in wasting my breath defining terms for you.
Just click this link.
Google is as close to an apocalyptic AI as Skynet was in 1997.
Not true, at all. The US was a hodgepodge of phone companies, state tariffs, interstate tariffs, intrastate tariffs, LATAs, and was owned by a lot of co-ops.
Ah, youngsters. Don't remember the old days.
No, you're talking about after the breakup of AT&T. Before the breakup, there was Ma Bell. There were a few places that still had other phone companies, but for the most part, it was the one giant monopoly, Ma Bell.
Some still remain... use Cincinnati Bell as an example.
That name, "Cincinnati Bell," should be a clue that this is a piece of one of the seven Regional Bell Operating Companies ("Baby Bells") that were formed as a result of the breakup of AT&T.
https://en.wikipedia.org/wiki/Breakup_of_the_Bell_System
http://www.techpolicydaily.com/communications/lessons-att-break-30-years-later/
http://money.cnn.com/2014/05/20/technology/att-merger-history/
POP3 access to gmail still works for me, via Thunderbird? Google does seem to make you jump through some security hoops sometimes to confirm that you want to use an "insecure app", but that they block POP3 is news to me?
AltaVista Is As Close To a Natural Monopoly As the Bell System Was In 1956
FTFY.
There's no time like the present. Well, the past used to be.
Well I use DuckDuckGo as my search engine and it's every bit as good as Google. There are many different search engines, actually. I don't know why people restrict themselves to just one.
"It is no measure of health to be well adjusted to a profoundly sick society." - Jiddu Krishnamurti
It's a weird report to me, as well; I have two separate Gmail accounts that I access through POP3 Thunderbird, and I haven't had a hiccup with them since I first set those profiles up.