Google has an effective monopoly on an Internet search. That is what the Justice Department asserts. Estimates vary as to exactly how the dominant market position of the company is. Nevertheless, it is safe to say that it has north of eighty percent, rendering its competitors almost irrelevant – both to its business planning and to consumers.
The company will most likely maintain its overwhelming control over the search engine space without government intervention. It is less due to anti-competitive side payments than to the structure o the market itself. Justice filed an antitrust filed on Tuesday. Market maximizes a competitive advantage known as network effects.
The telephone is an example of network effects. Thus, if only one person owns a phone, he has a curio. If two individuals own telephones, then they are a higher-tech version of what children do with two tin cans strung together by string. Nevertheless, if millions of people own telephones, then they become an essential tool. That is a network effect. With each additional user, a product gets more valuable.
Network effects are coming; in the case of Google, when people click on a link and scroll through the result, they have served. For a given research string, Google sees which results people find most useful. Then they rank them accordingly for future searchers. The more users they have, the more information they get. Thus, they can better refine the answers they return. That makes it incredibly difficult to launch a competitor. It is because, without as much search volume, results will not be as accurate. For eleven years with Bing, Microsoft has been trying to crack that chicken-and-egg problem. Still, they have less than a quarter of the market.
Nevertheless, Google does not make most of its money selling Internet searches. It is free. Nonetheless, it makes money by selling your eyeballs to advertisers. In the online ad market, Google has a unique position. By some estimates, the indicator is thirty percent.
Nevertheless, it is not a monopoly. Facebook, its closest competitor, is not far behind. Furthermore, both face stiff competition for those dollars from other technological firms.
The government’s complaint avoids that uncomfortable fact.
It defines that market exceptionally narrowly. They call that market ‘search advertising’. Nevertheless, advertisers do not care concerning they are advertising on social media or search. They only care about their advertising more in sales.
The government wants to forbid side payments to other companies. And that is what makes Google the default search engine.
- Trading Instrument