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Add to FavoritesA 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.
Howeve r, 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.
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Partially
The World Wide Web is a relatively new concept. It was invented in 1989 by Tim Berners-Lee, becoming publicly available in the middle of 1991. If it was a person, it would barely have the legal age to vote. Google's market is the Web, and although it's probably the number one player and the one with the strongest word about the future of the World Wide Web, we cannot say that Google controls the internet, merely because it is still growing and evolving every day. And that is the greatest requirement for someone to have a monopoly over something; it has to be able to control it.
Google dominancy has several motives, which are slightly out of scope for this article, but that can be summarized in one sentence: Google provides better search results than the competition. People started using Google just because they wanted to. Software companies started providing Google as the default search engine in browsers, just because it adds more value to their products. Advertisers started using Google Adwords, because it reaches millions of people and it can be directed toward a specific audience.
But none of these facts were imposed. Like a small town with just three or four restaurants, we cannot blame the one with greater variety, bigger space and better employees to have the most customers. But one day, someone in the town opens a new restaurant. He builds a very nice space, hires very good servants and chefs, and offers a quality menu. It would take time, because people are used to the old restaurant, but eventually the new one will conquer its position in the market, maybe never surpassing the preceding, but probably equaling it. As stated above, Google does not own or control the web. Serious competition may appear with no warning, and just like the restaurants, it can take time, but eventually they'll conquer their own share in the market.
Google is a company; they have investors and employees to be fed, and huge facilities to maintain. Their earnings come almost exclusively from advertising, the Adwords program, which are those little ads we see on almost every website. A quick look at internet marketers' discussion boards or blogs reveals that most of them are starting to be unpleased with Adwords campaigns. High prices and low conversion rates are pushing marketers out of Adwords and into new ways of advertising. What if Google cannot deal with that?
Google sits at the top position in the market. They sit there comfortably, without the perspective of losing it in the near future. But one thing is for sure, Google is not a monopoly, at least for now. But they can became one, just as easily as they can lose the number one spot.
Learn more about this author, Hernani Cerqueira.
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