Filed under: Competitive strategy, Google (GOOG), Wal-Mart (WMT)
Google, Inc. (NASDAQ: GOOG) has risen from the ranks of startup to one of the most powerful advertising forces on the planet in about a decade. Even though it maintains a corporate mantra of “don’t be evil,” the company’s absolute power over the world of world wide web advertising borders on on the perception of monopoly just because it has the best product in all the right places. Notice I used the word “perception” there. Is Google a monopoly because it simply has the ideal product that customers apparently use and love? Of course not.
Similar to how Wal-Mart Stores, Inc. (NYSE: WMT) rose to power, Google got there by providing something the competitors didn’t: the ideal product presented in the ideal way that was the most useful for the consumer. Wal-Mart opened more stores and offered the lowest prices, and consumers noticed and made it the largest retailer in the world as a result. Google is the largest world wide web advertiser in the world using the same means in a way, but like Wal-Mart, it has competitors (albeit, with much smaller market shares).
But when a company controls so much of the ad market in the online space, smaller advertisers and businesses that want to break onto the scene and fight with bigger competitors that might be slower and tuned out will have to use Google at some point. To grow, one simply can’t do business the way it was done in the past. Just like the small and scrappy manufacturer trying to get into Wal-Mart but can’t due to the bigger companies offering the same widgets at much lower prices, this effect works inside Google too. Advertisers bid on keywords and if they can remain relevant to the consumer within Google’s search results, they can out-spend smaller advertisers day in and day out. Are these market forces some kind of monopolistic behavior? Google doesn’t control this — it is simply giving the most relevant information to the customer. Still, one can see the spot Google could be in very shortly, if it isn’t already there.
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