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Evolving Trends

July 10, 2006

Is Google a Monopoly?

(this post was last updated on Jan 11, ‘07)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 companies that have to 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.)

Related

  1. Wikipedia 3.0: The End of Google?
  2. P2P 3.0: The People’s Google
  3. Google 2.71828: Analysis of Google’s Web 2.0 Strategy

Posted by Marc Fawzi

Tags:

Web 2.0, Google, Adam Smith, Monopoly, Trends, imperialism, Anti-Americanism, economies of scale, innovation, Startup, Google Writely, Google spreadsheets, DabbleDB, Google Base, Web 3.0

8 Comments »

  1. Google is large and influential. That doesn’t make it a monopoly.They have 39% market share in Search in the US – http://searchenginewatch.com/reports/article.php/3099931 – a lot more than their closest competitor, but it’s wrong to describe them as a monopoly. A monopoly has a legal entitlement to be the only provider of a product or service. More loosely, it can be used to describe a company with such dominance in the market that it makes no sense to try to compete with them. Neither apply to Google. I think your correspondents are simply reacting against the biggest player because they are the biggest, the same way people knock Microsoft, Symantec, Adobe, etc.

    Certainly, Yahoo!, MSN and Ask Jeeves, etc. aren’t ready to throw in the towel yet. Arguably, if they were struggling, and I don’t know if they are, DabbleDB would need to differentiate a little more against Google to make their model work as a business. I am not sure they need to.

    One last point, there isn’t a finite number of people looking for spreadsheets, etc., online. It’s a growing market with enormous untapped potential. The winners will be those best able to overcome the serious objections people have towards online apps – security & stability. Spreadsheets and databases are business apps – it will not be good enough to throw up something that is marked beta and sometimes works and might be secure. I think people dealing with business data *want* to pay for such products, because it guarantees them levels of service and the likelihood that the company will still be around in a year.

    Comment by Ian — July 11, 2006 @ 4:52 am

  2. I don’t think any company can compete against Google, especially not small companies. If MS and Interactive Corp. are having to struggle against Google then how can any small company compete against them? They have economies of scale that cannot be undone so easily, except through P2P subversion of the central search model (See my Web 3.0 article), which is going to happen on its own (I don’t need to advocate it.)Having said that I did specify ways to compete with Google in SaaS in the post titled Google 2.71828: Analysis of Google’s Web 2.0 Strategy

    But in gerenal, it’s getting tough out there because of Google’s economies of scale and their ability/willingess to copy-and-co-opt innovations across a broad segment of the market.

    Ian wrote:

    “A monopoly has a legal entitlement to be the only provider of a product or service.”

    Response:
    The definition of Monopoly in the US does not equate to state run companies or any such concept from the EU domain. It simply equates to economies of scale and ability to copy and co-opt innovations in a broad sector of the market. Monopolies that exist in market niches are a natural result of free markets but ones that exist in broad segments are problematic to free markets.

    Marc

    Comment by evolvingtrends — July 11, 2006 @ 5:21 am

  3. Don’t forget that Google prevents AdSense publishers from using other context-based advertising services on the same pages that have AdSense ads.Comment by drew — July 12, 2006 @ 12:23 am
  4. That’s a sure sign that they’re a monopoly. Just like MS used to force PC makers to do the same.Marc

    Comment by evolvingtrends — July 12, 2006 @ 5:05 am

  5. […] impact it has over a worldwide, super-connected tool like the Internet. An article by Marc Fawzi on Evolving Trends expressed this effectively […]Pingback by What Evil Lurks in the Heart of Google | Phil Butler Unplugged — November 6, 2007 @ 11:46 pm
  6. […] with existing and growing economies of scale is what makes Google a monopoly,” states Evolving Trends. As Google grows, many smaller companies will die. In order to set up its monopoly, Google is used […]Pingback by Google: pro’s and con’s « E-culture & communication: open your mind — November 14, 2007 @ 6:42 am
  7. Contrary to what the Google fan club and the Google propoganda machine would have you believe, Here are some real facts:- People do have a choice with operating systems. They can buy a MAC or use Linux.

    – Google has a terrible tack record of abusing its power:
    – click fraud lawsuit where they used a grubby lawyer and tricks to pay almost nothing.
    – they pass on a very small share to adsense publishers and make them sign a confidentiality agreement.
    – They tried to prevent publishers from showing other ads.

    – Google Adsense is responsible for the majority of spam on the Internet.

    – Google has a PR machine which includes Matt Cutts and others, who suppress criticism and even make personal attacks on people who are critical of them. They are also constantly releasing a barrage press releases with gimmicks to improve their image with the public.

    Wake up people. Excessive power leads to abuse.

    Comment by Pete — January 26, 2008 @ 1:25 pm

  8. I think this is a really important discussion which has been started here, thank you Marc.
    I got suspicious today when I heard about MS wanting to take over Yahoo! – or will it be Google…Anyway, this is really crucial stuff here, it’s the much praised freedom of the information age and hence the real hope for a truly open world which is at stake here, I hope there’s some degree of acknowledgment on this.

    So to feed the discussion more,

    – what can we do as users?
    – are there alternative independent search engines out there?
    – should we think of starting new strategies in information retrieval?
    – what ideas are around?

    Is there a good active community somewhere discussing these issues? would be interested in participating…

    thank you
    fabio

    Comment by Fabio — February 4, 2008 @ 11:42 am

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Evolving Trends

June 9, 2006

Google 2.71828: Analysis of Google’s Web 2.0 Strategy

The title of this post should read Google 2.0, but in the tradition of Google’s college campus ads I decided to use 2.71828, which is the value of e (the base of the natural system of logarithms), in place of just plain 2.0.

So what’s all the fuss about? Google throws a bucket of AJAX (not the Colgate-Palmolive variety) on some empty Web page and people go “they must be doing something genius!” and then on and on goes the blogosphere in its analysis of Google’s latest move.

The Problem with Google’s Spreadsheets and Writely

First of all, for those who are not acquainted with the decades old concept of CVS (concurrent versioning system), being able to have multiple users edit the same document and enjoy all the benefits of version control is nothing new. Programmers have been relying on such systems for several decades now. And Wikipedia’s multi-user document editing and version control capabilities is just one popular example of CVS being applied it to Web documents.

What I find unusual/weird is that fact that Google’s Spreadsheet and Writely do not follow the established CVS model where a given document is protected from being edited at the same time by more than one user.

In CVS-like applications, like Wikipedia, many users may edit a given document but not all at the same time. Having multiple users edit a document, a program’s source file or an Excel spreadsheet at the same time (where there are many logical and semantic inter-dependencies across the document) can result in conflicting changes that create a mess. Changing an input value or formula in one cell or changing a global variable or a method in a program file (that’s called by other methods elsewhere in the program) will have effects elsewhere in the spreadsheet or program. If one person makes the changes then they’ll be able to track all places in the code that would get affected and make sure that their changes do not create bugs in the program or the spreadsheet. They would also comment it so that others understand what the change is. But if two people are making changes at the same time to the same spreadsheet or program (or document) and one person makes changes in one area that affects another area that the other person happens to be making changes to directly or indirectly, then you could see how that would lead to bugs being created due conflicting changes.

For example, let’s say I change A from 1 to 2 in area AA which I expect to change the value of B (which is defined as A + C and has an acceptable range of 0-4) from 3 to 4 in area BB but at the same time you (the second person editing the document) change C from 2 to 3 in area CC which you expect to change the value of B from 3 to 4 in area BB, then we would end up with B = 5, which neither of us would expect and which is outside the acceptable range of B, i.e. any value for B larger than 4 would break the calculation/program, thus creating a bug. This is the most simple case. In real practice the “multiple simultaneous changes” scenarios would be much more complicated and involve more logical and semantic inter-connections. In the scenario where two or more people can edit the same spreadsheet, document or program at the same time, if one cannot see the changes that the other person is making and understand their effect on all related parts of the program, spreadsheet or document then one should not be making any changes of their own at the same time, or else they would be creating havoc, especially as the number of people editing at the same time goes beyond two people. With two people it is conceivable that a system or process can be worked out where people can synchronize their editing. With three or more people the interaction process grows in complexity so much that it would require implementing a strict synchronization process (or a more evolved model) in the editing application to coordinate the work of the simultaneous editors so that mess can be avoided.

The CVS model, which is used by Wikipedia and other multi-user editing applications, avoids the mess that would be created by “too many chefs in the kitchen” by letting each document (or each “dish” in this case) be worked on by only one chef at a time, with each chef leaving notes for the others as to what he did, and with rollback and labeling capabilities. I find it unbelievable that a company like Google with such concentration of rocket scientists cannot see the silliness in letting “too many chefs work on the same dish” (not just in the same kitchen) without implementing the synchronization process that would be needed to avoid a certain, predictable mess.

What people really want for multi-user document editing is what Wikipedia already offers, which is consistent with the CVS scheme that has been so successful in the context of software development teams.

What people really want for multi-user spreadsheet editing is what DabbleDB already offers, i.e. to be able to create multiple views of the same dataset, and I would say also to be able to leverage the CVS scheme for multi-user editing where users may edit the same document but not at the same time!

The Problem with Google’s Strategy

In trying to understand Google’s strategy, I can think of three possible theories:

1. The “short range chaos vs. long range order” theory. This implies that Google is striving towards more and more order, i.e. decreasing entropy, as a long range trend, just like the process of evolution in nature. This means that Google leverages evolving strategies (as in self-organization, complextity and chaos) to generate long range order. This is a plausible way to explain Google’s moves so far. Knowing what we know about the creative people they’ve hired, I’m tempted to conclude that this is what they’re doing.

2. The “complicated but orderly” theory. Think of this as a parametric function vs. a chaotic pattern or a linear or cyclical one. This type of strategy has the property of being both confusing as well as constructive. Several bloggers have pointed to this possibility. But who are they distracting? Microsoft? Do they really think Microsoft is so naive to fall for it? I doubt it. So I don’t understand why they would prefer complicated over simple when it comes to their strategy.

3. The “total uninhibited decline” theory. This implies chaos in both the short and the long ranges of their strategy. Few people would consider this a possibility at this time.

It would seem that Google’s strategy falls under theory number one, i.e. they work with a large set of evolving strategies, trying to mimic nature itself. But whether or not they recognize this about themselves I have no clue.

So what if I was to convince a bunch of kids to take the Firefox source code and ideas from the GreaseMonkey and Platypus plugins and produce a version of FireFox that automatically removes all AdSense ads from Web pages and reformats the page so that there would be no empty white areas (where the Ads are removed from) … What would that do to Google’s ad-suported business model? I think it could do a lot of damage to Google’s model as most users hate having their view of the Web cluttered with mostly useless ads.

However, some say that Google Base is the Next Big Thing, and that’s an ad-supported model where people actually want to see the ads. In that case, it would seem that those bloggers who say Google’s strategy fits under theory number two (complicated but predictable) are correct.

Personally, I believe that Google’s strategy is a mix of both complex as well as complicated behaviors (i.e. theories number one and two), which is a sure way to get lost in the game.

Beating Google in Software as a Service (Saas)

As far as I can tell, Google 2.0 (or Google 2.71828 as I like to call it) has been mostly about SaaS.

Google is now to the SaaS industry what Microsoft has been to the desktop software industry. VCs are afraid to invest in something that Google may copy and co-opt.

However, just like how MS had failed to beat Quicken with MS Money and how they’ve failed to beat Adobe and Macromedia (which are one now) Google will fail to beat those who know how to run circles around it. One exit strategy for such companies may be a sale to Yahoo (just kidding, but why not!)

In general here is what SaaS companies can do to run circles around the likes of Google and Yahoo.

1. Let Google and Yahoo spend billions to expand their share of the general consumer market. You can’t beat them there. Focus on a market niche.

2. Provide unique value through product differentiation.

3. Provide higher value through integration with partners’ products and services.

4. Cater to the needs of your niche market on much more personal basis than Google or Yahoo can ever hope to accomplish.

5. Offer vertical applications that Google and Yahoo would not be interested in offering (too small a market for them) to enhance your offering.

Posted by Marc Fawzi

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Tags:

Web 2.0, Ajax, Flex 2, Web strandards, Trends, RIA, Rich Internet applications, product management, innovation, tagging, social networking, user generated content, Software as a Service (Saas), chaos theory, Startup, Evolution, Google Writely, Google Spreadsheets, Google, DabbleDB, Google Base

14 Comments »

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July 10, 2006

Is Google a Monopoly?

(this post was last updated on Jan 11, ‘07)

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.)

Related

  1. Wikipedia 3.0: The End of Google?
  2. P2P 3.0: The People’s Google
  3. Google 2.71828: Analysis of Google’s Web 2.0 Strategy

Posted by Marc Fawzi

Tags:

Web 2.0, Google, Adam Smith, Monopoly, Trends, imperialism, Anti-Americanism, economies of scale, innovation, Startup, Google Writely, Google spreadsheets, DabbleDB, Google Base, Web 3.0

Read Full Post »

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