I once wrote a blogpost regarding Google as a monopoly [below]. I think it was good but then again I’m biased. I think the arguments pretty superficial for Google-being a monopoly. There’s a pretty good public choice-type question here toward antitrust: What are the proportions of antitrust cases that are (1) genuinely spurred on by the presence of real monopoly power and (2) which are the result a less efficient competitor with political clout. My priors are: 80/20. Even then I think I’m being generous toward the FTC. Please pardon the lack of brevity for this post.
On Google: If it Ain’t Broke Don’t Fix It.
Scores.org has a post suggesting that Google is a monopoly because its “tentacles tap into sizable market shares” referring to the search engine, map services, YouTube, Android, Gmail, and Chrome. The accusations rest on suggestive grievances and a superficial analysis of Google.
They protest that a search of “email” on Google shows Gmail first and then Yahoo! Mail, and that Google searches show only Google Maps, not MapQuest or Yahoo! Maps. This is like accusing a restaurant of being a monopoly because they don’t show their competitors’ menus.
Besides, are Google users harmed by first seeing Google Maps or Gmail? Seattle is still west of Chicago on Google Maps, and Gmail still sends and receives emails, just like Yahoo!. These matters are peripheral though; the true superficiality of monopoly accusations comes from mistaking Google users as Google’s customers.
Real customers pay. Google users don’t. Users are inputs in Google’s production process. Google’s true output is ad space. A monopoly, weakly defined, exists when a firm dominates the supply of an output. Google’s revenues do not come from their search engine, YouTube, Gmail, etc. directly. If Google is a monopoly it is because they restrict the supply of ad space to charge a higher price.
But to control the supply of ad space on the web, Google must draw as many users as possible. Absent of a government granted monopoly right, to maintain market superiority Google must provide superior services to users.
If Google actually is a monopoly, the result is that consumers are exposed to less advertising. The economic loss is that less advertising leads to less trade between users and advertisers who would have advertised on Google, but could not afford to because of the monopoly price.
The monopoly case for Google is weak and superficially generated. Considering their resounding success the alternative rationale for monopoly accusations against Google is far more plausible: their competitors are seeking to use the government to curtail it because they can’t keep up.
In this world there are two ways to supplant a superior competitor: (1) produce a more superior product or (2) get the government to knock them down a notch — by forcing them to compete “fairly.” In the former the consumers benefit from innovation, in the latter consumers lose because innovation is stifled. Lesson of the story is that if it ain’t broke, don’t fix it .
If you also have trouble getting through to the second link, here it is http://dealbook.nytimes.com/2011/08/31/the-justice-department-versus-deal-makers/
I once wrote a blogpost regarding Google as a monopoly [below]. I think it was good but then again I’m biased. I think the arguments pretty superficial for Google-being a monopoly. There’s a pretty good public choice-type question here toward antitrust: What are the proportions of antitrust cases that are (1) genuinely spurred on by the presence of real monopoly power and (2) which are the result a less efficient competitor with political clout. My priors are: 80/20. Even then I think I’m being generous toward the FTC. Please pardon the lack of brevity for this post.
ReplyDeleteOn Google: If it Ain’t Broke Don’t Fix It.
Scores.org has a post suggesting that Google is a monopoly because its “tentacles tap into sizable market shares” referring to the search engine, map services, YouTube, Android, Gmail, and Chrome. The accusations rest on suggestive grievances and a superficial analysis of Google.
They protest that a search of “email” on Google shows Gmail first and then Yahoo! Mail, and that Google searches show only Google Maps, not MapQuest or Yahoo! Maps. This is like accusing a restaurant of being a monopoly because they don’t show their competitors’ menus.
Besides, are Google users harmed by first seeing Google Maps or Gmail? Seattle is still west of Chicago on Google Maps, and Gmail still sends and receives emails, just like Yahoo!. These matters are peripheral though; the true superficiality of monopoly accusations comes from mistaking Google users as Google’s customers.
Real customers pay. Google users don’t. Users are inputs in Google’s production process. Google’s true output is ad space. A monopoly, weakly defined, exists when a firm dominates the supply of an output. Google’s revenues do not come from their search engine, YouTube, Gmail, etc. directly. If Google is a monopoly it is because they restrict the supply of ad space to charge a higher price.
But to control the supply of ad space on the web, Google must draw as many users as possible. Absent of a government granted monopoly right, to maintain market superiority Google must provide superior services to users.
If Google actually is a monopoly, the result is that consumers are exposed to less advertising. The economic loss is that less advertising leads to less trade between users and advertisers who would have advertised on Google, but could not afford to because of the monopoly price.
The monopoly case for Google is weak and superficially generated. Considering their resounding success the alternative rationale for monopoly accusations against Google is far more plausible: their competitors are seeking to use the government to curtail it because they can’t keep up.
In this world there are two ways to supplant a superior competitor: (1) produce a more superior product or (2) get the government to knock them down a notch — by forcing them to compete “fairly.” In the former the consumers benefit from innovation, in the latter consumers lose because innovation is stifled. Lesson of the story is that if it ain’t broke, don’t fix it .
If you also have trouble getting through to the second link, here it is http://dealbook.nytimes.com/2011/08/31/the-justice-department-versus-deal-makers/
ReplyDelete