Why Google’s Search Monopoly is So Vexing

Google’s search monopoly1 is very real, and durable, precisely because it is easy for end-users to switch to other search engines (I mostly use DuckDuckGo, for instance.) This is not a paradox—because Google has to keep working on and improving search to keep end-users, the fact is that most of them don’t switch. Google is still largely better than its competitors.2

For a lot of people this would be the end of the story—Google has a monopoly, but through its own merits, and therefore there is no consumer harm, though maybe some additional regulation (e.g. on privacy practices) is necessary. But that’s not the end of the story at all, because the fact that Google has such a lock on users means that the content, companies, and edge services that rely on Google as a source of traffic exist at its mercy. If you are a restaurant that depends on Google for people to find out about you there is no “switching.” You can’t just decide one day “Why, I would like to start getting my business through Bing, instead.” If you’re trying to compete with Google in one of its “verticals” (say, image or map search) you’re going to, at least, have a very hard time.3

I’m not even going to address the advertising issues.

It’s not impossible for other internet business to thrive in this environment, and for many of them Google is a good source of traffic and probably will always be. But if there is a risk that that traffic might drop other entities need to find a way to not depend on Google. You can own popular computing platforms, like Apple, you can be completely app-based, like Snap, or you can own one of the handful of sites that people go to directly, like Facebook or Amazon. But these are the exceptions that prove the rule. (As an aside this is not a paradoxical or contradictory statement. Crack a Wikipedia some time.) Most business are screwed if they suffer a sudden drop in Google traffic.

A further question is whether Google is a “natural” monopoly or just the regular old kind—that is, is its current dominance mere happenstance or does the search market inevitably tend toward monopoly, meaning that if not Google some other company would be dominant? Here, I don’t know, but I think there are reasons to suspect it might be a little bit of both.

The typical story with natural monopolies is that there are such cost advantages to scale that having more than one competitor doesn’t make sense. For instance with utility companies, there are very high fixed costs, yet marginal (or even no) costs associated with serving a new customer. So a new entrant would have to spend the same amount in fixed costs as the incumbent, yet the incumbent could always undercut the new entrant when it comes to serving any particular customer. It can spread its fixed costs around the rest of its customer base while the new entrant has to find some way to recover its costs from its smaller customer base. This is hard to do. (But, nothing is impossible. With a dense-enough population, a rich-enough new entrant, or a lazy-enough incumbent anything is possible. The question is what is actually likely.)

With platform companies things are more complicated—there are network effects and virtuous (or vicious, depending on your point of view) cycles. For example social networks become more valuable the more users they have, meaning that new users will gravitate to them, and software platforms are valuable to users if they have applications, and to application developers if they have users. These dynamics can be very powerful.

So the question is whether Google search enjoys some of these dynamics—and the usual answer is that, yes it does. Namely, the more users use Google, the more data it collects on user behavior, which allows it to improve its offering, which attracts more users, and so on. So like a social network the “natural monopoly” here is control of the user base, not data centers or CDNs (though those things help).

But, there is a limiting principle to these network effects dynamics: diminishing returns. Many people thought that Android, with its much larger user base, would drive iOS out of the market, the way that Windows very nearly did to classic Mac OS. Until the web became more important than desktop software, Apple was on a death spiral since all the good applications were being written for Windows first, or only for Windows, so even long-time Mac users had no choice but to switch, further creating reasons for new applications to focus on Windows. But this hasn’t happened in mobile, in part because the iOS user base, though much smaller than Android’s, is still gigantic: iOS alone, for instance, has more users than the entire PC market ever did. Of course it makes sense to write apps for this platform.

Similarly, though it seems obvious that user data improves a search engine—how much data is enough? Could the market sustain two or three very large search engines, supplying them with all the user data they could ever need? Or will the search engine with a slightly bigger user base always be able to eke out a slight quality advantage, thus attracting more users, and starting the whole snowballing process over again?

Here, I just don’t know. I think it’s an empirical question, and the value of data is not fixed but could change as more deep learning-style techniques are developed. For example Google was recently able to make its photo recognition algorithms a few percentage points more accurate by vastly increasing the size of the training data used—is this a meaningful difference? Would something similar happen in search? At the same time all of Google’s smarts don’t seem quite up to the challenge of preventing its AI from spitting out “fake news” answers to questions—it’s only as smart as its input data and the internet is not very smart.

This matters because the business and policy response is different depending on the nature of the monopoly in question. If there’s a natural monopoly you can’t just wish it away—maybe you regulate it, or nationalize it, or turn it into a co-op—but if you just break it up it will either re-form, or you will create permanent inefficiencies and quality problems.4 But if it’s just a regular old monopoly you can break it up, or wait for normal competitive dynamics to either replace it (what if people stop using search engines altogether? what if something new and more important comes along?) or create a new competitor (like Facebook was to Myspace).

I don’t have any answers here. The title of this post was “Why Google’s Search Monopoly is So Vexing,” not “Here is an Answer to Google’s Search Monopoly.” To summarize: Google keeps its monopoly by offering a high-quality (and free) service to end-users, which in turn gives it tremendous power over those sites it links to. Those sites can’t “switch” anywhere. So typically those sites complain, not users, and it can be hard to distinguish between legitimate complaints and illegitimate ones (for example, if Google de-lists a scam site, this is not a problem but the scam site might make the same antitrust arguments as a legitimate site). At the same time, it’s not clear whether search engines are inherently a natural monopoly market where, left alone, cost or quality considerations will always drive towards monopoly, or whether it’s just one of those things that happens, and where competition or technological change, or antitrust action, can shake things up. Because search engines are at the center of internet, which is now at the center of commerce, culture, and politics, this is all quite vexing.

  1. Its market share is a bit over 60% in the US and a bit over 80% globally, and is over 90% in some markets. Monopoly is not either/or; the question is whether it has market power.

    However I don’t think search is Google’s even strongest monopoly, from an end-user perspective. Youtube is. Google’s search monopoly is probably more broadly important to the economy but (from an end-used perspective, again, and as discussed in this post) there are alternatives. But for content on Youtube there are often no alternatives. This is trivially true of many media sites—there are no alternatives to Netflix for Stranger Things, for instance—but for the kinds and sheer quantity of content Youtube hosts I believe it would be a much harder platform to displace.

  2. DuckDuckGo differentiates itself through a focus on privacy and power-user features but most people value good results much more. Even I turn to Google when DDG lets me down—and DDG supports searching Google via its “bang” command feature—one of those power-user features. ↩︎
  3. There’s a simple rejoinder here, that if Google doesn’t do a good job in presenting results in a fair way that it would risk losing customers—and to an extent that may be true. If Google de-listed Amazon or Facebook it might lose customers. But if Google decided to just flat-out de-list some smaller category of site and launch its own how many customers would it actually lose? And even if they quality of Google decreased somewhat, how long would it take end-users to even notice? ↩︎
  4. Think it through for a classic natural monopoly—how would you break up the water company? You’d just create a series of smaller natural monopolies (which is probably inefficient, though having just one nationwide water company is not ideal either) or you’d have to lay down a competing set of water pipes, which is inefficient. Or you’d create some kind of pseudo-competition like some states have with energy, which might be valuable but is just a form of regulation. ↩︎