Completely

by Kent Davidson

Created on: January 31, 2009

A monopoly is a company which, according to dictionary.com, has "exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices."

First, one must understand that Google made $5.7 billion dollars in net revenue in the fourth quarter of 2008, and $6.63 billion in profit for the entire year. Their primary business, for those uninitiated, is charging "per click" for those links on the right hand side of a search under the heading "Sponsored Links." Advertisers pay between $0.10 to $20 or more for a single "click" which represents a qualified web site visitor.

Compare this with its closest competitor, Yahoo!, which made $1.38 billion in net revenue in Q4 2008, and suffered a $303 million dollar loss in gross revenues. (Annual gross revenues are still to be announced at writing.)

Consider this: Google receives 72% of all Internet searches, compared to 17.8% for Yahoo, and 5.5% for Microsoft. And, Google shows ads for almost half of Internet searches performed on its site.

Is Google a monopoly? Of course not. Is Microsoft a monopoly? Of course not. But they both are near-monopolies.

A monopoly has relevance when it pertains to a few things for consumers and businesses alike:

- The lack of any choice in choosing a vendor for a particular service
- The consolidation of power into the hands of a single entity with whom we must trust

So, given the above, where does Google stand?

For example, say I am a small business owner who wishes to attract customers to my web store. I would consider doing pay-per-click marketing and have a choice of Google AdWords, Yahoo! Search Marketing, or Microsoft Advertising AdCenter (a.k.a. MSN AdCenter), and some smaller players.

Given a limited budget and limited time to manage my advertising, which one would you choose? 72% of the market? Or 17%?

Now, let's change the scenario and we're a large company which wants to attract more customers: Would you NOT advertise on Google?

I think the "choices" above (or lack thereof) shows that Google is a near monopoly. In short, you have to advertise on Google to play in their space, because they are the dominant player in the market. You have no choice.

Now consider the volume of online traffic that Google "sees" through its servers:

- Google sees 72% of internet searches out there
- Any site which uses AdSense (which are those "Ads by Google"), including this site
- Any site which uses their free analytics (formerly Urchin, now Google Analytics)
- Any web browser with the Google toolbar installed sends every page view back to Google
- Any web browser which uses "auto suggestions" in the search box sends the keys you type into that box to Google

Given the above: Can you estimate how much of the total internet traffic that passes through the Googleplex in Mountain View, California?

Some will state that Google can be trusted to be on the receiving end of so much browsing information (and personal information that is typed into a search engine). Would you want some engineer at Google to know that you search for "Yeast Infection?" How about "Divorce Lawyer?"

The question is not whether we can trust Google, it's whether it's a good thing to have so much power and information in the hands of a single company.

Finally, like other "near-monopolies" out there, when a company has $6 billion dollars in profit each year, it puts them in a position where they can buy other companies to further cement their position, making it almost impossible for them to have any reasonable competition. Google has recently purchased the number one video site on the internet, YouTube, the number one banner advertisement firm, DoubleClick.

Of course, calling Google a monopoly or near-monopoly does not discount what Google has accomplished, nor does it blame them for performing well. Google has exceptional technology, fast and comprehensive search, and they offer a myriad of tools which make many people's lives easier and better.

This debate is also not about what the government should do about a monopoly or near-monopoly.

However, like the checks and balances of the United States Federal Government, it is important to have anti-trust laws which protect consumers and businesses alike when a company is in a position of power.

Learn more about this author, Kent Davidson.
Click here to send this author comments or questions.