Google a Natural Monopoly

May 8, 2009

I don’t think I used the “m” word once in my most recent Google monograph, Google: The Digital Gutenberg here. I was surprised with the title of the Money – Fortune – CNN article “Google: A Natural Monopoly?” here. The question mark softens the message to some degree, but I think the “m” word is likely to become more popular. More people are discovering – albeit belatedly – that the GOOG is a different type of commercial enterprise. I know how difficult it is to communicate the distinct nature of the Google. The company is no spring chicken, and its start up days are in its distant past. Jia Lynn Yang wrote, citing the Wall Street Journal:

As James Stewart wrote in The Wall Street Journal this week: “Google’s continued gains in market share bear out my contention that Google is that rare breed: the natural monopoly. By natural, I also mean lawful, since the monopoly derives from Google’s skill and qualities inherent in the business, not from anticompetitive behavior.” Adds Stewart: “I sometimes get the sense that antitrust regulators, in their single-minded zeal to promote competition, ignore the fact that monopolies, in and of themselves, aren’t illegal, or even necessarily bad.”

My thought is that some effort might be invested productively in understanding what makes Google different. I am not certain the textbook definition of “monopoly” applies to Google. The system makes it possible for individual and companies to profit using the company’s partner programs. Chunks of code are available as open source and in use by competitors. Google’s management seems oddly detached from the traditional approach to product roll outs, pricing, and sales. The company offers free or reasonably priced application programming interfaces to developers. Even a rural Kentucky addled goose can tap into the system to generate information about Google using Google. I don’t think anyone at Google knows or particularly cares about my Overflight service.

My view is that if a great monopolist of the past returned – say, Leland Stanford or JP Morgan – both would chastise Google for management ineptitude. Google, based on my research, has not followed the traditional grooves leading to marketing dominance. If anything, Google has blundered into its role as a digital AT&T. But Google is a platform. If its users and partners don’t take advantage of its opportunities, others will. Because of the way in which information diffuses, the water in the river is different when the laggards jump in. This fast-changing, organic nature of Google sets it apart. I am not sure Messrs. Stanford and Morgan would be able to cope with Google-like entities any more than those who are now trying to describe a 21 st century companies in terms better suited to the 19th century.

Is Google good? Sort of. Is Google bad? Sort of. The boundary between these two extremes is what makes Google interesting. Blaming Google for evolving into a new type of company is going to entertain legions of watchers, make many lawyers wealthy, and exercise the ingenuity of Google critics. At this time, Google deserves a more thoughtful appraisal than smooth, easy use of the “m” word.

Stephen Arnold, May 8, 2009


One Response to “Google a Natural Monopoly”

  1. Curt Dalton on May 8th, 2009 10:03 am

    Great article, if you think they aren’t a monoply, watch this video on the new Google Twitter Search Engine that is being developed. They will dominate social media organization as they do search….Sergie is a wildman!

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