July 10, 2006
Given the growing feeling that Google holds too much power over our future without any proof that they can handle such responsibility wisely, and with plenty of proof to the opposite1, it is clear why people find themselves breathing a sigh of relief at the prospect of a new Web order, where Google will not be as powerful and dominant.
In the software industry, economies of scale do not derive from production capacity but rather from the size of the installed user base, as software is made of electrical pulses that can be downloaded by the users, at a relatively small cost to the producer (or virtually no cost if using the P2P model of the Web.) This means that the size of the installed user base replaces production capacity in classical economic terms.
Just as Microsoft used its economies of scale (i.e. its installed user base) as part of a copy-and-co-opt strategy to dominate the desktop, Google has shifted from a strategy of genuine innovation, which is expensive and risky, to a lower-risk copy-and-co-opt strategy in which it uses its economies of scale (i.e. its installed user base) to eliminate competition and dominate the Web.
The combination of the ability to copy and co-opt innovations across broad segments of the market together with existing and growing economies of scale is what makes Google a monopoly.
Consider the following example: DabbleDB (among other companies) beat Google to market with their online, collaborative spreadsheet application, but Google acquired their competitor and produced a similar (yet inferior) product that is now threatening to kill DabbleDB’s chances for growth.
One way to think of what’s happening is in terms of the first law of thermodynamics (aka conservation of energy): if Google grows then many smaller companies will die. And as Google grows, many smaller companies are dying.
It is not any better or worse than it used to be under the Microsoft monopoly for the small companies that must compete with Google . But it’s much worse for us the people because what is at stake now is much bigger. It’s no longer about our PCs and LANs, it’s about the future of the entire Web.
You could argue that the patent system protects smaller companies from having their products and innovations copied and co-opted by bigger competitors like Google. However, during the Microsoft dominated era, very few companies succeeded in suing them for patent infringement. I happen to know of one former PC software company and their ex CEO who succeeded in suing Microsoft for $120M. But that’s a rare exception to a common rule: the one with the deeper pockets always has the advantage in court (they can drag the lawsuit for years and make it too costly for others to sue them.)
Therefore, given that Google is perceived as a growing monopoly that many see as having acquired too much power, too fast, without the wisdom to use that power responsibly, I’m not too surprised that many people have welcomed the Wikipedia 3.0 vision.
1. What leaps to mind as far as Google’s lack of wisdom is how they had sold the world on their “Do No Evil” mantra only to “Do Evil” when it came to oppressing the already-oppressed (see: Google Chinese censorship.)
- Wikipedia 3.0: The End of Google?
- P2P 3.0: The People’s Google
- Google 2.71828: Analysis of Google’s Web 2.0 Strategy
Posted by Marc Fawzi