As you probably be know by now I’m a very strong open web advocate. I also believe strongly that software is eating the world and that old organisations and artificial barriers are being violently disrupted by the web and its very nature of global network.
Winner takes all
I can’t ignore that in many areas of the web, a winner takes all pattern emerges and the largest player eventially takes all other players out of the market: it’s true for search, for the social graph, for retail, for classified, for VOIP… and will probably also be true for cabs, for home-sharing… etc.
There is no doubt, that, even though these companies may take ugly shortcuts, their product and service eventually provide a better answer to their customers than their competitors.
As such, they should win. There is no valid reason to prevent people from using a given service.
I’m always puzzled when I hear “backpackers” lamenting on the fact that, even in the most remote locations of the world, kids wear T-shirts, drink coke, use cell-phones and listen to the same pop music.Is it really fair to expect those born in these already remote places to live naked, drink some kind of root and grass brew as well as use drums to communicate with their friends?
Given the choice people will eventually tend to all use the same platform, because it eventually provides the best answer to their perceived needs.
We’ve already known for a long time that monopolies are bad. The lesson is that when there is a monopoly, the prices are not fair, because they’re set unilatteraly. You’ll rightfully argue that most web giant services are free: you do not pay for search, you do not pay for your social graph. Even when you pay for a product, the cost of the platform is blended in the cost of this product. When buying a TV off of Amazon, how much of that TV goes to Amazon and how much goes to the TV manufcaturer? Given their profit rate, it’s fair to assume that Amazon’s cut tends toward 0.
But price is far from being the worst byproduct of monopolies. I can see 2 other worse threats:
- Lack of resilience
- Lack of innovation
Lack of resilience
By now, most scentists agree that bio-diversity is the key to surviving for many species. We tend to consider animals extinct as soon as the remaining population is reduced to a handful individuals, because genetic defects will affect them much harder, and because outside events (sicknesses, changes of environment) will not let them enough time to adapt.
Monopolies have the same impact on our economies. When our main search engine is down, or when its results do not show the level of quality we’d expect, economic players are threatened as they have no other way to aquire new customers through search. When Skype is down, many companies become unreachable by phone… etc. Our economies are more fragile when there is less competition and each player becomes a dreaded single point of failure.
Lack of innovation
Another consequence of the monopolies monoculture is the lack of innovation. Once a company has reached a dominant market share, its main objective is to preserve the status-quo. Disrupting a market is by definition… disruptive: players are dealt a new hand and the rules are changed. If you already have the best hand, why jeopardize it? Also, the better your hand relatively to other players, the more dangerous it is to get a new one.
There again, Google provides us with a couple telling things: it’s the most dominant search engine is most countries of the world. Yet, how much as searched evolved in the past 10 years? Does it look very different? Does it provide better search results? Better insights as to what you’re looking for and what you could find? Changes are at best marginal… Google is not touching search anymore and that’s also visible in its very organisation. These days, Amit Singhal seems to be in charge of search, and if I trust Recode, he reports to Sundar Pichai, who himself reports to Larry Page. Google is still an extremely innovative company, but not in search anymore.
The cost of change
If you’re still with me, you’ll probably point that given the asumptions above, people will soon flock off these rusty monopolies. I wish, but I also know that changes are expensive. Our brains are building shortcuts so that we don’t have to think about decisions we make: Google has become a synonymous of search after all.
The obviousness of these services also makes it tricky to just understand their limitations or what’s possible. They became the benchmark and the very rare new challengers are building themselves in one of two ways: embracing or opposing choices made by the incumbent, when there are probably other orthogonal ways for each product decision.
I was recently reminded by the fact that the best strategy to escape the earth’s gravity is not to go upward in its opposing direction, but to go sideways, as fast as possible. Maybe we should apply the same idea when trying to compete with web giants.