Winner-Take-All: Google and the Third Age of Computing (Skrentablog): "Google has won both the online search and advertising markets. They hold a considerable technological lead, both with algorithms as well as their astonishing web-scale computing platform. Beyond this, however, network effects around their industry position and brand will prevent any competitor from capturing market share from them -- even if it were possible to match their technology platform.
To paraphrase an old comment about IBM, made during its 30 year dominance of the enterprise mainframe market, Google is not your competition, Google is the environment. Online businesses which struggle against this new reality will pay opportunity costs both in online advertising revenue as well as product success."
Most businesses on the net get 70% of their traffic from Google.
Search engines have zero user switching costs. Unlike switching email providers, there is no user data to move over, or addresses which need to be forwarded or communicated to peers. You just type in a new name and go to the new place.
If switching costs are zero, the first thought is that it should be easy for a worthy challenger to take some share away from the leader. Paradoxically, it's the reverse that happens.
Zero switching costs lead to a winner-take-all market for the leader. Even a modest initial lead will snowball until majority market share is reached and maintained. This is because, faced with a choice between two products, in the absence of switching costs users will choose the better one, even if it is only slightly better.
Google had a vastly better product than any other search engine for a number of years. Competitors have closed the gap somewhat, but Google is still better. Everyone (70-80%) knows this now, and so the Google-has-better-search concept is now built into Google's brand.
Even if a competitor such as Yahoo, MSN or Ask were to fully close the gap at this point, they would still have to overcome the final brand perception gap. This is the effect where market research shows that users who see Google's logo on top of Yahoo's results perceive the results to be of higher quality; users looking at Google's results with Yahoo's logo on top view them as having less relevance. Brand perception effects have been measured to account for about 8% in things like beer. A few years ago an AOL researcher replicated this study in a shopping mall in Virginia with AOL Search results vs. Google.
tags: control point domination search internet distribution
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