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Google's Mission: To Organize the World's Search Market and Make It Naturally Monopolizable

Published on August 12, 2008
by John Paczkowski

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“We see little to stop Google from reaching 70 percent market share eventually; the question, really, comes down to, ‘How long could it take?'” RBC Capital Markets analyst Jordan Rohan asked that question back in March 2006. Today he has his answer: Not long at all, really.

According to new metrics from Hitwise, Google’s (GOOG) share of the U.S. Internet search market grew to 70.77 percent in July. That’s a 10 percent increase over the same month last year. The search juggernaut’s growth came once again at the expense of rivals Yahoo (YHOO), Microsoft (MSFT) and Ask. The market share of all three declined in the same period–Yahoo’s to 18.65 percent, Microsoft’s to 5.36 percent, and Ask’s to 3.53 percent.

Seems that search really is a natural monopoly business, as Credit Suisse analyst Heath Terry once noted. “We believe that search is a natural monopoly business and expect that over time Google will continue to gain share until they have effectively reached 100 percent,” Heath wrote in a research note to clients last year. “Over the last two years Google has gained 50 [basis points] of share/month in the U.S. and 60bp globally. We expect these share gains to accelerate as declining scale makes it more difficult for competitors to justify the technology investments needed to maintain search result quality.”

If that’s the case, if search is a natural monopoly business, then Google is apparently its natural monopolist. After all, a 70 percent share of the search market is … well, it’s obscene, really. And it begs many a question about the company’s partnership with Yahoo and the potential antitrust problems it may present. No wonder the document outlining the terms of two companies’ search advertising deal is so heavily redacted

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URL: http://allthingsd.com/20080812/goog-market/