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Rich Skrenta : Google Has Won Online Search and Advertising Markets

Rich Skrenta, the co-founder & CEO of Topix, has declared Google the winner of search and online advertising in a very provocative post. Here are some choice quotes:

Just as Microsoft used their platform monopoly to push into vertical apps, expect Google to continue to push into lucrative destination verticals — shopping searches, finance, photos, mail, social media, etc. They are being haphazard about this now but will likely refine their thinking and execution over time. It’s actually not inconceivable that they could eventually own all of the destination page views too. Crazy as it sounds, it’s conceivable that they could actually end up owning the entire net, or most of what counts.

The net isn’t a directed graph. It’s not a tree. It’s a single point labeled G connected to 10 billion destination pages.

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.

Yahoo should accept Google’s search and monetization dominance. Yahoo will not recover the search application, and browse views are not competitive and cannot be made to be so. They should do a deal with Google for Adwords/Adsense across their entire network, as Ask Jeeves did. They should be able to obtain at least an 85% rev share; that would take them from $0.10/search to $0.17, a 70% increase in search revenue overnight.

Major companies will succeed by working within the framework of Google’s industry dominance, and smaller players will operate in niches or in service to the giant.

There are three reactions:

  • Acceptance: Yes it’s Google’s world, we all just live in it
  • Horror: Oh my God!
  • Resistance: We’ve can’t just sit back and let this happen

I’m not quite as convinced that Google can/will own everything as Rich Skrenta suggests. It clearly owns search. But it’s not clear that Google can develop the depth in all these vertical areas that he argues the company might. Google is taking a “horizontal” approach to developing verticals (i.e., co-op, base), which has strengths but profound limitations. It’s also clear that Google didn’t predict the rise of user-generated content and doesn’t have a competitive social media destination (unless you count YouTube, which I would debate). It’s possible that RSS/feeds will evolve in such a way that browsing over time changes and that “push” and “pull” become less distinct than they are today. And mobile is an unresolved area that might look very different than the Internet does today.

But it’s very clear that almost everyone now is dependent on Google for traffic and that’s a key fact that all companies must confront.

Greg Sterling is the founding principal of Sterling Market Intelligence, a consulting and research firm focused on online consumer and advertiser behavior and the relationship between the Internet and traditional media, with an emphasis on the local marketplace.

Category SEO
Rich Skrenta : Google Has Won Online Search and Advertising Markets

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