Internet advertising: a natural monopoly?
The news that Google is to supply advertising technologies to Yahoo! will rightly raise fears that the Google is following a path formally taken by Microsoft; much loved innovator turned greedy monopolist… yet before we condemn Google – which, like Microsoft founder Bill Gates, does a lot of work for charity – it’s worth asking if online advertising is a natural monopoly.
In retrospect it’s clear that both operating systems and office software were natural monopolies, as interoperability is so important to users. From the mid-to-late 1980s through to the end of the 1990s, information technologies went through an incredible revolution with which many struggled to keep up. People learnt that the only way to be sure everyone would be able to read our documents was if we all used the same software. Microsoft got lucky with windows and Office followed, giving it the muscle to force Internet Explorer on us. Today, people are a little less rigid, but only a little.
Internet advertising is different kind of monopoly. The parallel is closer to that of eBay, which has seen off other auction sites. Just as eBay auctions stuff off, so Google auctions ad space. And the market works most effectively when everyone is using the same platform and so the most bidders and sellers are in the room.
Comments (2 comments)
I really wouldn’t know how a government would be about breaking up a search monopoly.
Tell Google they can only have 50% of the market?
It seems unthinkable and unworkable…
Although a monopoly is something best avoided…
Andy Walpole / July 14th, 2008, 8:48 pm / #
Search does appear to be a natural monopoly as well.
Stephen Newton / July 15th, 2008, 9:18 pm / #
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