The Internet is an observation deck for the theory of free trade.
It’s a near-perfect example: on the Internet, exchanges take place without obstacles, and competition is constant.
This natural selection breeds champions. In economics, we call these monopolies.
I believe that we can be optimistic because we’re in a system of free choice. In the end, consumers vote for “moral” leaders (1): the system is self-regulating.
To illustrate this, I would like to use Google as an example of a “friendly monopoly.” (2)
What is behind Google’s success?
Some think that it’s Google’s “technical” qualities.
Its “technical” capital is undeniable, but this is more a communication tool selected to reassure the financial world.
If we stop there, then we’re forgetting something essential. Let’s remember that at the beginning, Altavista and Yahoo were more serious competitors.
What was Google’s secret weapon against its competition (3)?
Trust.
Google made a bet on transparency. Unlike its competitors, the ranking of sites is “democratic” and transparent (4). It’s based on the vote of Internet users and doesn’t depend on commercial agreements.
Every day, Internet users vote for Google, and we can bet that any attempt to “cheat” by modifying their ranking would be quickly corrected by a drop in the number of hits.
The lesson?
I’d like to make another comparison with Microsoft.
Microsoft’s capital is based on:
- Agreements (not always transparent) with Intel, Dell, and numerous partners
- Signed contracts with clients
- Patents and the threat posed by lawyers
- Money spent on advertising to defend the trademark
In comparison, Google is an “angel”:
- Google doesn’t sign contracts with its clients; they can leave at any time. The relationship is based on trust
- Google spends very little on advertising. Its promotion is largely based on viral marketing
It their relationship with Google, consumers are considered adults …
The danger
The danger is that Google may find that there’s no guaranteeing its position on the stock market. How will the management react to the arrival of a serious competitor?
We can hope that our trust in Google is the best guarantee against seeing this “angel” become an unfriendly devil.
(1) In writing this sentence, I thought of my American friends. There’s hope…
(2) I consider Google a true friend these days because it’s the thing that brings a regular flow of readers to this blog …
(3) A big thank you to Dan Gillmor who writes with intelligence in his articles on Google and many other topics
(4) It’s the famous “Google ranking”, which in spite of its relative opaqueness remains credible
(5) “Don’t be evil” is Google’s motto
"How will the management react ... ?"
This gives some hints :
http://www.sec.gov/Archives/edgar/data/1288776/000119312504142742/ds1a.htm#toc59330_1
Let's hope that the management at Google will continue to be able to keep away pressure from shareholders and this so-stupid-short-term-results habit.
Posted by: Xavier Maury | December 13, 2004 at 05:36 PM