Google’s moat in search

Google has been a focal point in the ongoing Big Tech anti-trust conversation, having achieved what many describe a monopoly in general search. Their defence? The “competition is one click away”.

Google Search may be dominant due to a combination of the following hypotheses:

• Product quality: consumers may simply love Google Search because it is far more capable than the competition. If it exists, this quality moat could be the result of:
  • Patents: The patents owned by Google may be vital for search, making it difficult for competitors to compete technologically.
  • Economies of scale: Google’s scale may uniquely position it to invest in the level of R&D required to build a great search engine, given it is already the market leader and has extraordinary monetisation thanks to their ad business. This type of scale also enables Big Tech companies to aggressively acquire emerging competitors.
  • Execution advantage: Google’s Way of Working and monopoly on great talent in search could result in a major competitive advantage when it comes to execution.
• Brand recognition: Google Search has been dominant for so long that it’s the primary option that comes to mind for users.
• Commercial advantages: Google is known to have agreements with platform owners, such as Apple, that lock it in as the default search engine. Upcoming search engines do not have the capital to compete on a partnerships level.
• Regulatory advantages: many markets are starting to aggressively regulate privacy. These regulations create a higher barrier to entry for new entrants into the search and especially ads business as compliance can be incredibly expensive and risky.

My take:

For regulators to respond to Google’s monopoly on general search, they must understand why Google has an unfair competitive advantage (if they do at all). Otherwise, further regulation could lead to unexpected consequences. For example, by focusing on privacy-related regulation, governments may actually improve Google’s competitive advantage. Restricting platforms from setting default search engines based on payment or quid-pro-quo arrangements could, however, go a long way towards improving competition. Apple, for example, given their stance on privacy, would be unlikely to promote Google as the primary choice for search if they were not being paid handsomely to do so. Given the dominance of iOS, this change alone could be enough to introduce more healthy competition into the search ecosystem.

Therefore:

• It’s important to consider which of the above advantages are fair advantages versus unfair advantages.
• Regulators should reconsider their approach to regulating user privacy. While I am an advocate for strong user privacy, current legislation mostly raises the barrier to entry for challengers, therefore cementing the dominance of Big Tech, who have the means and risk tolerance to deal with the red tape.
• Consider how defaults should be chosen on platforms, especially in industries dominated by a single player.
• What should be done in situations where patents are cementing monopolies in place?