(In this post we will be talking about the issue of whether Google is a monopoly search engine.) On dictionary, a monopoly is a market situation where a producer or a group of producers control supply of a good or service, and where entry of new producers is prevented or highly restricted. In this post, we will discuss whether google is a monopoly.

According to statistics, Google controls approximately 74% of google search results. In 2017, Google had revenues of approximately $110 billion. The bulk of this revenue came from its advertising activities, in particular AdWords. Adwords functions on an auction basis, with ad space awarded to advertisers with the highest bid. This means the cost of advertising is determined by auction participants. However, just because of its supernormal profits, does it necessarily mean that Google is a monopoly?

As a matter of fact, Google does not determine the price of advertising, the market does. Google only facilitates competition between market participants. However, Google determines what is “relevant”. In addition, Google’s monopoly does not come from coercive or anti-competitive practices. Instead, it is derived from a superior product. Advertisers choose Google because they can get real-time feedback on the effectiveness and engagement of their ads. People choose to use Google because of its ubiquity and dominance. Therefore, its market position is truly because of its reach and ability.

Furthermore. on the internet, there is little barrier to entry so anyone can set up competition at little cost. The most aggressive and recent competitor was Microsoft’s Bing. Being the 2 biggest search engines, they engage in heavy price competition. Google cannot raise price indiscriminately without losing market share as advertisers would choose to move to Bing. Therefore, there is no free adjustment of prices for Google, and hence, it should not be a monopoly.

Other than the internet, Google also engages in intense competition with its rivals in the Mobile Operating Systems industry. Google’s Android competes with Apple’s iOS. Wile Google is winning by a market share measure, Apple is doing better when looking at margins. The aggressive competition pose a significant threat for Google and hence there is a continuous motivation to innovate.

Another threat to Google is Facebook, a form Social Media. Being the dominant form of Social Media, many users turn to Facebook to express their opinions in the forms of Facebook posts. Their Facebook posts can gain widespread reach in a matter of seconds, due to the large number of users on Facebook. This poses a threat for Google, which relies on the internet, which is less commonly used in expression of opinions due to media censorship.

Therefore, despite of its large market share and supernormal profits, Google should not be considered a monopoly. Instead, the search engine industry is an oligopoly industry.

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