5 ms·

The term "Natural Monopoly" has a special meaning besides just the common definition of both words, which is missing from this discussion, but is in my opinion

The term "Natural Monopoly" has a special meaning besides just the common definition of both words, which is missing from this discussion, but is in my opinion the most interesting topic of discussion. Basically all software fits the economic definition of "Natural Monopoly". Natural monopolies exist in situations where the fixed cost is large and the marginal (per-customer) cost is small. In these situations, it only makes sense for one company to exist, as each additional company that exists will just increase that large fixed cost, while not decreasing the per-customer cost. Therefore, each additional company just increases the the total societal and average per-customer cost. Natural Monopolies have been defined and talked about for longer than software has been around. The long-running natural monopoly example has been that it doesn't make sense to have two power lines to your house. Another historical example includes newspapers, who have fixed article writing costs, but can distribute it to every customer in a city. Some people consider that Wal-marts in small towns are natural monopolies, given the fixed cost of a large store, and the lack of a market for more than one store in a given area. Software, of course, has large fixed costs and small per-customer costs. The questions for me are: -Historically, why have some natural monopolies been considered bad (railroads, utilities), and needing regulation, and others (newspapers, Walmart) not? -Is Google's advantage really as a true economic natural monopoly, or is it just a really powerful habit and brand? Bing seems pretty close in search quality, but yet few switch over. -If the economic definition of natural monopoly exists at Google and most software companies - why are there countless exceptions in software: database software (Oracle, SQL Server, DB2...), Web browsers (Chrome, Edge, FireFox, Safari), calculator apps, etc? -What are the current issues with potential natural monopolies at these software companies, and would a regulated model make them better or worse for society? http://www.investopedia.com/terms/n/natural_monopoly.asp http://www.investopedia.com/terms/n/natural_monopoly.asp https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly

ouid 9y ago
>Bing seems pretty close in search quality, but yet few switch over. a) Why would anyone switch if they are both equal and both free? b) Most people use chrome. Most people don't change their default search engine. c) As much as people pretend to hate Google, they actually hate Microsoft a lot more, and for good reason. Microsoft operates on bad faith far more frequently than Google does, most of their business decisions seem to revolve around the question "How do we leverage product A to force the user to use our product B?" whereas Google's anticompetitive behavior has always been more passive.
- 5ilv3r 9y ago
  C is only true from the customer's perspective. Google doesn't seem to be willing to crush competition, but they are still willing to acquhire them into being on their own side. Youtube, for example, was clearly superior to google video, so it was purchased. Customers were not very impacted.
- ocdtrekkie 9y ago
  In fact, you are self-defeating your arguments. Chrome was entirely built to be leveraged to force people to use Google Search, since people don't change their default search engine. Bear in mind, they paid Apple and Mozilla each over a billion dollars to be everyone's default search. Sundar Pichai, the current CEO of Google, got started by pushing the Google Toolbar as one of those bloatware add-ons when you install other software, that would hijack your default search when you installed it. Google also leverages Android to force people to use all sorts of Google products, using their agreements with OEMs which ensure things like default search, default maps, default email setup, etc. That's the whole point of Android. Google's anticompetitive behavior is extremely active, and they make Microsoft look like an innocent kitten in comparison. It sounds like you don't know a whole lot about how Google operates as a business.
  - AnimalMuppet 9y ago
    > ... and they make Microsoft look like an innocent kitten in comparison. It sounds like you don't remember Microsoft back in the day. Google "Halloween Memos". (Edit: Note particularly the bit about "de-commodifying protocols", that is, finding ways to break standards and create lock-in.) Microsoft literally paid web sites to put HTML in their pages so that Netscape wouldn't handle properly. Microsoft literally generated false error messages when they detected a product from a competitor. (IIRC, that one was on a spreadsheet, and the product was maybe a DOS clone? There wasn't anything wrong with the clone, but the error message made it look like there was.) An equivalent, today, for Google would be if, when you typed bing.com into Chrome, it took you to Google. Or if Android detected Microsoft apps and made them break in mysterious ways. ouid's point is valid. Google is more passive in anticompetitive behavior. (That doesn't make the behavior good. It makes it less bad than Microsoft. Microsoft is hardly the "innocent kitten" here. However, I will concede that Microsoft hasn't been as bad as they were for... maybe a decade?)
Aloha 9y ago
You hit it on the head.. https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly I will strongly argue that most utilities are natural monopolies, google is not like that.. anyone could create a equivalent functionality search engine without massive resources to do so, this is most certainly not the case with say, a cellular carrier, where to build out one moderately sized market your're looking at starting cost ~100 million dollars, and around 5 billion to start for a national carrier (250k a site, times 20,000 sites)... and my numbers are likely too low by half, because they only factor in the site costs, not the overhead to get to the point where you can build sites.
- rhino369 9y ago
  How much does it cost to build a competitive search engine? I'm not sure it's that cheap. Bing launched in 2006. Billions of dollars were sunk into it by a major company who used their monopoly over desktop to push the service. And it only became profitable in 2016. The barriers to entry seem extremely high.
- deleted 9y ago
  [deleted]

ouid 9y ago

>Bing seems pretty close in search quality, but yet few switch over. a) Why would anyone switch if they are both equal and both free? b) Most people use chrome. Most people don't change their default search engine. c) As much as people pretend to hate Google, they actually hate Microsoft a lot more, and for good reason. Microsoft operates on bad faith far more frequently than Google does, most of their business decisions seem to revolve around the question "How do we leverage product A to force the user to use our product B?" whereas Google's anticompetitive behavior has always been more passive.

5ilv3r 9y ago
C is only true from the customer's perspective. Google doesn't seem to be willing to crush competition, but they are still willing to acquhire them into being on their own side. Youtube, for example, was clearly superior to google video, so it was purchased. Customers were not very impacted.
ocdtrekkie 9y ago
In fact, you are self-defeating your arguments. Chrome was entirely built to be leveraged to force people to use Google Search, since people don't change their default search engine. Bear in mind, they paid Apple and Mozilla each over a billion dollars to be everyone's default search. Sundar Pichai, the current CEO of Google, got started by pushing the Google Toolbar as one of those bloatware add-ons when you install other software, that would hijack your default search when you installed it. Google also leverages Android to force people to use all sorts of Google products, using their agreements with OEMs which ensure things like default search, default maps, default email setup, etc. That's the whole point of Android. Google's anticompetitive behavior is extremely active, and they make Microsoft look like an innocent kitten in comparison. It sounds like you don't know a whole lot about how Google operates as a business.
- AnimalMuppet 9y ago
  > ... and they make Microsoft look like an innocent kitten in comparison. It sounds like you don't remember Microsoft back in the day. Google "Halloween Memos". (Edit: Note particularly the bit about "de-commodifying protocols", that is, finding ways to break standards and create lock-in.) Microsoft literally paid web sites to put HTML in their pages so that Netscape wouldn't handle properly. Microsoft literally generated false error messages when they detected a product from a competitor. (IIRC, that one was on a spreadsheet, and the product was maybe a DOS clone? There wasn't anything wrong with the clone, but the error message made it look like there was.) An equivalent, today, for Google would be if, when you typed bing.com into Chrome, it took you to Google. Or if Android detected Microsoft apps and made them break in mysterious ways. ouid's point is valid. Google is more passive in anticompetitive behavior. (That doesn't make the behavior good. It makes it less bad than Microsoft. Microsoft is hardly the "innocent kitten" here. However, I will concede that Microsoft hasn't been as bad as they were for... maybe a decade?)

Aloha 9y ago

You hit it on the head.. https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly I will strongly argue that most utilities are natural monopolies, google is not like that.. anyone could create a equivalent functionality search engine without massive resources to do so, this is most certainly not the case with say, a cellular carrier, where to build out one moderately sized market your're looking at starting cost ~100 million dollars, and around 5 billion to start for a national carrier (250k a site, times 20,000 sites)... and my numbers are likely too low by half, because they only factor in the site costs, not the overhead to get to the point where you can build sites.

rhino369 9y ago
How much does it cost to build a competitive search engine? I'm not sure it's that cheap. Bing launched in 2006. Billions of dollars were sunk into it by a major company who used their monopoly over desktop to push the service. And it only became profitable in 2016. The barriers to entry seem extremely high.
deleted 9y ago
[deleted]