7 ms·

In the Grip of the New Monopolists

58 points by grellas 16y ago

doyoulikeworms 16y ago
This system is "tolerated," simply because there is nothing wrong with rightfully earned monopolies. Monopolies turn bad the moment they gain special treatment from the government. That's where things get ugly. There's nothing stopping another search engine from springing up (and they do, of course). There's nothing stopping search engine XYZ from topping Google except for the aggregate of our voluntary decisions. This is not a bad monopoly.
- cilantro 16y ago
  Monopolies can do a great deal of anticompetitive things without the help of the government. In the past antisocial pricing that was the primary concern. While these firms are different in that they do not charge users directly, their revenues are directly related to the size of their user base and other familiar tactics can be employed: For example, using their user-base to squeeze competitors in vertical industries, and employing defensive tactics that ensure direct competitors can never gain traction (see contacts spat).
  - meric 16y ago
    If the monopoly is in an industry where the barrier of entry is very high, then yes, they could raise prices to antisocial levels and make exorbitant profits; However if the monopoly was in an industry where the barrier of entry is very low, the monopoly doesn't have that much power to raise prices to antisocial levels; If they do other competitors will jump in. Imagine, through low prices and effective logistics you've achieved a monopoly in producing wheat. You have a monopoly because no one can afford to sell as low as you do, not even the poor developing country farmer; Now imagine that you got arrogant and raised your prices by 350%, you'd start to lose the monopoly because other competitors can now enter the market. That's why you wouldn't raise prices even if you have a monopoly, if your industry has a low barrier of entry. No matter what you cannot employ defensive tactics to ensure your competitors (other farmers) can never gain traction, if your prices are too high. Now, whether search or social networks are high barrier of entry industries, is another question. (I tend to think so)
    - JanezStupar 16y ago
      Is monopoly even possible in easy to enter markets? Could you please present an example?
      - meric 16y ago
        Let's say in a town of 200 people you open the first fruit shop. Turns out people there love fruits but just never knew it. Everyday they only come to your shop to buy fruits. That's a monopoly already. However, you'd only stay a monopoly if your prices stay competitive. If your prices are too expensive and your margins are too high, other opportunists will jump in to open their own fruit shop, and there's nothing you can do to stop them. You can try to drop your prices, but that's it, and now you're worse off, your prices are lower and there's a competitor. You'd rather have prices to be low all the time and have all the business to yourself.
        JanezStupar 16y ago
        I think that your example does get a point across, however there are a couple of problems with it: 1. I was hoping for a real world example (if its possible then there should be many examples, right?). 2. You imply that the fruit shop owner has access to the most efficient supply chain of all the other potential, would be fruit merchants and thus the only way he can loose his primate is if he raises the prices too much. How about people who start competing for various reasons like: I don't like the guy, or I don't have a better idea for business, etc. 3. Defining monopoly too locally has its own problems: Grocery store has a monopoly over selling groceries on a block, if there are two groceries, we can say that each has a monopoly over their part of the block, etc. See that's not really a monopoly. The point is that in free, easy to enter markets monopolies are impossible - by the virtue of free and easy to enter market. What monopoly really is - domination of a single entity over a regulated (possibly by the monopoly itself) and expensive to enter market. Examples: http://en.wikipedia.org/wiki/Monopoly#Examples_of_legal_.28and_or.29_illegal_monopolies http://en.wikipedia.org/wiki/Monopoly#Examples_of_legal_.28a... See no village fruit merchants there.
        16y ago
- joe_the_user 16y ago
  Actually, I'd see Amazon, Google and Facebook as three somewhat different types of monopolies. Google's monopoly comes economies of scale and superior technology. No one is locked into the Google, you just prefer Google because it is superior. Facebook's monopoly is network effect. Amazon is something like traditional horizontal monopoly. The only thing the companies have in common is that they're on the Internet. But the main conclusion is that Internet is where all future market dramas will be played out.
  - klbarry 16y ago
    But Amazon is only something like 10% of all online sales, isn't it?
    - sliverstorm 16y ago
      "all online sales" is not really relevant. Nobody is anywhere close to monopolizing all sales on the internet. Saying Amazon is not a monopoly because they don't dominate all sales is like saying PacBell wasn't a monopoly because they didn't control all forms of interpersonal communication. Instead, look at their chunk of sales of their core items, such as books.
  - Qz 16y ago
    Google search is starting to suck a lot though. Now half the time I search for something I end up with garbage and give up. Tried searching up the name of a virus .exe and got a spam page instead of anything relevant as the first result, with more spam pages for the rest. This is not a one time or occasional occurrence anymore.
    - joe_the_user 16y ago
      Agreed and by that token Google seems like they could lose their position. It's a shame since alternatives still look more evil.
      - wazoox 16y ago
- leot 16y ago
  "there is nothing wrong with rightfully earned monopolies." Market dynamics can create an anti-competitive, bad-for-the-economy monopoly without gov't help. Your assertion assumes that there exists no economic barrier so large that it is irrational for a potential competitor to try to overcome it. In fact, there are easy counter-examples: imagine a town's public water source dries up and the only well is owned by a purely rational/greedy party.
- wazoox 16y ago
  Did you read "In search of stupidity"? It's a very interesting and amusing book, and it makes a point that Microsoft monopoly owes more to competitors' ineptitude (Borkand, Lotus, Novell, Digital Research, etc) than to Microsoft genius per se. Therefore Microsoft monopoly may be "rightfully earned" in some sense, as bad as it is - though it carried some positive effects too.
kiba 16y ago
Is Google a serious monopoly when it owns only 64.4%? http://content.usatoday.com/communities/technologylive/post/2010/05/googles-market-share-slips-as-bing-rivalry-heats-up-/1 http://content.usatoday.com/communities/technologylive/post/...
- chaosmachine 16y ago
  Those numbers aren't realistic for most sites: http://news.ycombinator.com/item?id=1692758 http://news.ycombinator.com/item?id=1692758
  - natmaster 16y ago
    Sample bias.
    - nostrademons 16y ago
      We don't know whether the sample bias is on the part of comScore or on the individual webmasters replying to that thread, though.
ojbyrne 16y ago
Facebook is five years old. Holding them up as a exemplar of "monopoly" seems a little misguided.
- blueben 16y ago
  Oh? How many other social networking sites do your mother or cousin or friends spend their time on? If you blocked Myspace and Facebook on your corporate network, which one would people pitch a fit about losing?
  - ataggart 16y ago
    The very fact that people wouldn't pitch a fit about losing access to Myspace is a perfect example of why these network-effect-based "monopoly" claims are bullshit.
  - ojbyrne 16y ago
    If they can be that dominating in 5 years, there's no reason they can't be eclipsed by another company in the next 5 years. Myspace is an apt comparison.
    - bryanlarsen 16y ago
      Why is myspace an apt comparison? Myspace never had a significant market share worldwide.
DanielBMarkham 16y ago
And the tool the new monopolists are using? The browser. Somebody needs to redesign the browser so that it becomes vendor agnostic. That is, if I'm doing a search, I shouldn't see a brand or care who is providing me the results. All I care about is the quality of the results. Same goes for reading articles and buying things. Take the branding out of the web, and you'll kill the monopolies. (Yes, it would wreak havoc on the entire internet business model, but I have the magic wand, and I'm prepared to use it) Is there some reason we have to have brands? Can't all the things we do and places we go be put into a configuration file somewhere and managed automatically?
- mattmanser 16y ago
  This has nothing to do with the browser. This has to do with network effects.
  - DanielBMarkham 16y ago
    Your reply looks correct but incomplete. Yes, the immediate dominance has to do with networking effects. But the network effects are all based on the branding, and the browser delivers the branding along with the content. Without the branding the network effects are negligible. People use Google because it says "Google" on the page. People go to Facebook because their friends are there. None of the results they want -- search results or chatting-updating friends, has anything to do with the underlying companies involved, although it has everything to do with the network effect, as you point out. To demonstrate, let's suppose all of my 300 friends all used different social networking software. If somebody kept a configuration file that allowed my new browser to access their information in real time and assimilate it for me in one corporate-free spot, I could still have the networking experience of being with my friends -- say picking out a new movie to rent -- without the branding having to be part of the networking effect.
    - nostrademons 16y ago
      It's a trivial Greasemonkey script to suppress all the chrome on a search result page. If you really care that much, you or anyone else could whip one up and share it with the world. I suspect very few people would use it, because I suspect that many people use a search engine because of the branding. It makes them feel comfortable and safe; they know that this search engine has given them good results in the past, and this makes them believe that this search engine will give them better results in the future. In other words, this problem exists between keyboard and chair. It's not a technological problem: the technology exists right now to do exactly what you suggest. It's a psychological problem: people naturally trend toward the familiar, and that makes the familiar even more familiar.
mattmanser 16y ago
His conclusion is a little odd, but all in all an excellent summation of where we are. I think we are fortunate that we have Google as one of the monopolies, as at the moment they seem to be willing to be vaguely non-evil, but have already drifted significantly from 'don't be evil'. As much as I like to rail against them, it could be worse.
natmaster 16y ago
Bullshit trying to distract us from the real monopolies like News Corp, and AT&T. By this journalists' standards MySpace would have been a monopoly 5 years ago, but look at where that went. (PS: news corp owns WSJ & MySpace)
- rjett 16y ago
  I wouldn't call it bullshit. The piece focused on purely online information networks so I really don't think there's anything devious or subversive going on here as your comment implies.
deleted 16y ago
[deleted]
dasil003 16y ago
I didn't really agree with this idea initially, but the argument was persuasive. Certainly I don't think any of them have the kind of monopoly that AT&T had, but Facebook might be close as they continue sinking their Facebook Connect hooks in. The trouble is that monopolies are not good or bad per se. Google and Facebook are still mostly innovating and adding value. At some point the landscape starts to change, and that's when they get scared and start getting anti-competitive and the balances start to tip. The tricky thing is determining when this is. Certainly the government is ill-equipped to figure it out, because it's all sound bites and popular opinion by an apathetic voter base. So the rationale for why a monopoly should be broken up gets sanded down to a slogan about monopolies being bad, and pretty soon politicians are jumping on the monopoly-busting bandwagon without any kind of legitimate rationale. This is why, I really value the old-school intellectual movement that Chomsky represents of standing outside and speaking truth to power. Even if a lot of his analysis is flawed and ideas ultimately wrong, the honesty with which he pursues them is admirable and we need many more like him to keep America honest. The rich won't do it (as a group they are too fearful), the powerful won't do it, and government is certainly too awash in lobbyists and bureaucracy to have any hope.
iwr 16y ago
Remember that the great monopoly to be broken up by anti-trust law was in fact a government-mandated one: AT&T. Without the government banning competition, AT&T would have been very much different in 1974 (the time of the divestiture).
- wazoox 16y ago
  Infrastructure companies are natural monopolies. I suspect that Google, Facebook, etc are actually natural monopolies, too. The problem with these monopolies is the same as with others : they capture excess money, which hinders innovation in the long run. Hint : I don't believe in the free-market la la land BS anyway.
  - iwr 16y ago
    How do you reconcile that with the fact that it was illegal to compete with AT&T? Once upon a time, Altavista was The Search and MySpace was The Social Network.
    - wazoox 16y ago
      > How do you reconcile that with the fact that it was illegal to compete with AT&T? It was illegal for some reason, you know. > Once upon a time, Altavista was The Search and MySpace was The Social Network. They never quite reached the monopoly level, though.
      - iwr 16y ago
        It became illegal because competitor operators were a threat to AT&T. The government made a deal with them by giving them legal protection, getting some political control in return. Even after the divestiture, the Baby Bells had preferential treatment and received automatic mobile licenses when the technology appeared. Secondly, it's kind of silly to think about web monopolies when users can freely change operators. Google, Facebook etc have to work hard to maintain their users.
        16y ago
fauigerzigerk 16y ago
He makes some valid points, but what doesn't quite add up is that not all of these "monopolies" are built on network effects. Google search, for instance, doesn't benefit from network effects. Gmail doesn't benefit from network effects, nor does anything else that Google does (successfully). Of course Google benefits from its size in many ways but that's not the same kind of self feeding dynamic as a network effect. Amazon became big by selling books. Did publishers really say, hey, let's sell to the biggest online book store only? Would it be any more inconvenient for buyers to buy from a different online book store just because it was not the biggest? I don't think so. There is no network effect, just plain old economies of scale and the power of brands. Myspace was the biggest. Friendster was the biggest. Both in areas that clearly do benefit massively from network effects. So, I agree with the author on some points, but I think he plays down the "being better" part a little too much and he ignores substitution effects.
- bryanlarsen 16y ago
  Did we read the same article? The author definitely payed much less attention to "network effects" than most articles on this subject usually do, explaining that it is quite common for monopolies to be created for new technologies, as well as giving several other reasons, some of which you reiterated.
  - fauigerzigerk 16y ago
    It appears to me that he explains the emergence of these monopolies almost exclusively with network effects: "Internet industries develop pretty much like any other industry that depends on a network: A single firm can dominate the market if the product becomes more valuable to each user as the number of users rises. Such networks have a natural tendency to grow, and that growth leads to dominance." and "Still, in a land where at least two mega-colas and two brands of diaper can duke it out indefinitely, why are there so many single-firm information markets? The explanation would seem to lie in the famous American preference for convenience. With networks, size brings convenience." Did you find any other explanation in the article?
    - 16y ago
julius_geezer 16y ago
Google is the only one I use constantly. I've been on Amazon this out of curiosity to see what people said about a book I disliked, but haven't bought anything from them in years. Facebook? No. Twitter? No.
mynameishere 16y ago
forgoing Facebook or Twitter means giving up whole categories of activity. Seriously? Twitter is one of the most plainly worthless websites every made and Facebook is a pure copycat of a copycat of a copycat.

58 points by grellas 16y ago

This system is "tolerated," simply because there is nothing wrong with rightfully earned monopolies. Monopolies turn bad the moment they gain special treatment from the government. That's where things get ugly. There's nothing stopping another search engine from springing up (and they do, of course). There's nothing stopping search engine XYZ from topping Google except for the aggregate of our voluntary decisions. This is not a bad monopoly.

cilantro 16y ago
Monopolies can do a great deal of anticompetitive things without the help of the government. In the past antisocial pricing that was the primary concern. While these firms are different in that they do not charge users directly, their revenues are directly related to the size of their user base and other familiar tactics can be employed: For example, using their user-base to squeeze competitors in vertical industries, and employing defensive tactics that ensure direct competitors can never gain traction (see contacts spat).
- meric 16y ago
  If the monopoly is in an industry where the barrier of entry is very high, then yes, they could raise prices to antisocial levels and make exorbitant profits; However if the monopoly was in an industry where the barrier of entry is very low, the monopoly doesn't have that much power to raise prices to antisocial levels; If they do other competitors will jump in. Imagine, through low prices and effective logistics you've achieved a monopoly in producing wheat. You have a monopoly because no one can afford to sell as low as you do, not even the poor developing country farmer; Now imagine that you got arrogant and raised your prices by 350%, you'd start to lose the monopoly because other competitors can now enter the market. That's why you wouldn't raise prices even if you have a monopoly, if your industry has a low barrier of entry. No matter what you cannot employ defensive tactics to ensure your competitors (other farmers) can never gain traction, if your prices are too high. Now, whether search or social networks are high barrier of entry industries, is another question. (I tend to think so)
  - JanezStupar 16y ago
    Is monopoly even possible in easy to enter markets? Could you please present an example?
    - meric 16y ago
      Let's say in a town of 200 people you open the first fruit shop. Turns out people there love fruits but just never knew it. Everyday they only come to your shop to buy fruits. That's a monopoly already. However, you'd only stay a monopoly if your prices stay competitive. If your prices are too expensive and your margins are too high, other opportunists will jump in to open their own fruit shop, and there's nothing you can do to stop them. You can try to drop your prices, but that's it, and now you're worse off, your prices are lower and there's a competitor. You'd rather have prices to be low all the time and have all the business to yourself.
      - JanezStupar 16y ago
        I think that your example does get a point across, however there are a couple of problems with it: 1. I was hoping for a real world example (if its possible then there should be many examples, right?). 2. You imply that the fruit shop owner has access to the most efficient supply chain of all the other potential, would be fruit merchants and thus the only way he can loose his primate is if he raises the prices too much. How about people who start competing for various reasons like: I don't like the guy, or I don't have a better idea for business, etc. 3. Defining monopoly too locally has its own problems: Grocery store has a monopoly over selling groceries on a block, if there are two groceries, we can say that each has a monopoly over their part of the block, etc. See that's not really a monopoly. The point is that in free, easy to enter markets monopolies are impossible - by the virtue of free and easy to enter market. What monopoly really is - domination of a single entity over a regulated (possibly by the monopoly itself) and expensive to enter market. Examples: http://en.wikipedia.org/wiki/Monopoly#Examples_of_legal_.28and_or.29_illegal_monopolies http://en.wikipedia.org/wiki/Monopoly#Examples_of_legal_.28a... See no village fruit merchants there.
        16y ago
joe_the_user 16y ago
Actually, I'd see Amazon, Google and Facebook as three somewhat different types of monopolies. Google's monopoly comes economies of scale and superior technology. No one is locked into the Google, you just prefer Google because it is superior. Facebook's monopoly is network effect. Amazon is something like traditional horizontal monopoly. The only thing the companies have in common is that they're on the Internet. But the main conclusion is that Internet is where all future market dramas will be played out.
- klbarry 16y ago
  But Amazon is only something like 10% of all online sales, isn't it?
  - sliverstorm 16y ago
    "all online sales" is not really relevant. Nobody is anywhere close to monopolizing all sales on the internet. Saying Amazon is not a monopoly because they don't dominate all sales is like saying PacBell wasn't a monopoly because they didn't control all forms of interpersonal communication. Instead, look at their chunk of sales of their core items, such as books.
- Qz 16y ago
  Google search is starting to suck a lot though. Now half the time I search for something I end up with garbage and give up. Tried searching up the name of a virus .exe and got a spam page instead of anything relevant as the first result, with more spam pages for the rest. This is not a one time or occasional occurrence anymore.
  - joe_the_user 16y ago
    Agreed and by that token Google seems like they could lose their position. It's a shame since alternatives still look more evil.
    - wazoox 16y ago
leot 16y ago
"there is nothing wrong with rightfully earned monopolies." Market dynamics can create an anti-competitive, bad-for-the-economy monopoly without gov't help. Your assertion assumes that there exists no economic barrier so large that it is irrational for a potential competitor to try to overcome it. In fact, there are easy counter-examples: imagine a town's public water source dries up and the only well is owned by a purely rational/greedy party.
wazoox 16y ago
Did you read "In search of stupidity"? It's a very interesting and amusing book, and it makes a point that Microsoft monopoly owes more to competitors' ineptitude (Borkand, Lotus, Novell, Digital Research, etc) than to Microsoft genius per se. Therefore Microsoft monopoly may be "rightfully earned" in some sense, as bad as it is - though it carried some positive effects too.

kiba 16y ago

Is Google a serious monopoly when it owns only 64.4%? http://content.usatoday.com/communities/technologylive/post/2010/05/googles-market-share-slips-as-bing-rivalry-heats-up-/1 http://content.usatoday.com/communities/technologylive/post/...

chaosmachine 16y ago
Those numbers aren't realistic for most sites: http://news.ycombinator.com/item?id=1692758 http://news.ycombinator.com/item?id=1692758
- natmaster 16y ago
  Sample bias.
  - nostrademons 16y ago
    We don't know whether the sample bias is on the part of comScore or on the individual webmasters replying to that thread, though.

ojbyrne 16y ago

Facebook is five years old. Holding them up as a exemplar of "monopoly" seems a little misguided.

blueben 16y ago
Oh? How many other social networking sites do your mother or cousin or friends spend their time on? If you blocked Myspace and Facebook on your corporate network, which one would people pitch a fit about losing?
- ataggart 16y ago
  The very fact that people wouldn't pitch a fit about losing access to Myspace is a perfect example of why these network-effect-based "monopoly" claims are bullshit.
- ojbyrne 16y ago
  If they can be that dominating in 5 years, there's no reason they can't be eclipsed by another company in the next 5 years. Myspace is an apt comparison.
  - bryanlarsen 16y ago
    Why is myspace an apt comparison? Myspace never had a significant market share worldwide.

DanielBMarkham 16y ago

And the tool the new monopolists are using? The browser. Somebody needs to redesign the browser so that it becomes vendor agnostic. That is, if I'm doing a search, I shouldn't see a brand or care who is providing me the results. All I care about is the quality of the results. Same goes for reading articles and buying things. Take the branding out of the web, and you'll kill the monopolies. (Yes, it would wreak havoc on the entire internet business model, but I have the magic wand, and I'm prepared to use it) Is there some reason we have to have brands? Can't all the things we do and places we go be put into a configuration file somewhere and managed automatically?

mattmanser 16y ago
This has nothing to do with the browser. This has to do with network effects.
- DanielBMarkham 16y ago
  Your reply looks correct but incomplete. Yes, the immediate dominance has to do with networking effects. But the network effects are all based on the branding, and the browser delivers the branding along with the content. Without the branding the network effects are negligible. People use Google because it says "Google" on the page. People go to Facebook because their friends are there. None of the results they want -- search results or chatting-updating friends, has anything to do with the underlying companies involved, although it has everything to do with the network effect, as you point out. To demonstrate, let's suppose all of my 300 friends all used different social networking software. If somebody kept a configuration file that allowed my new browser to access their information in real time and assimilate it for me in one corporate-free spot, I could still have the networking experience of being with my friends -- say picking out a new movie to rent -- without the branding having to be part of the networking effect.
  - nostrademons 16y ago
    It's a trivial Greasemonkey script to suppress all the chrome on a search result page. If you really care that much, you or anyone else could whip one up and share it with the world. I suspect very few people would use it, because I suspect that many people use a search engine because of the branding. It makes them feel comfortable and safe; they know that this search engine has given them good results in the past, and this makes them believe that this search engine will give them better results in the future. In other words, this problem exists between keyboard and chair. It's not a technological problem: the technology exists right now to do exactly what you suggest. It's a psychological problem: people naturally trend toward the familiar, and that makes the familiar even more familiar.

mattmanser 16y ago

His conclusion is a little odd, but all in all an excellent summation of where we are. I think we are fortunate that we have Google as one of the monopolies, as at the moment they seem to be willing to be vaguely non-evil, but have already drifted significantly from 'don't be evil'. As much as I like to rail against them, it could be worse.

natmaster 16y ago

Bullshit trying to distract us from the real monopolies like News Corp, and AT&T. By this journalists' standards MySpace would have been a monopoly 5 years ago, but look at where that went. (PS: news corp owns WSJ & MySpace)

rjett 16y ago
I wouldn't call it bullshit. The piece focused on purely online information networks so I really don't think there's anything devious or subversive going on here as your comment implies.

deleted 16y ago

[deleted]

dasil003 16y ago

I didn't really agree with this idea initially, but the argument was persuasive. Certainly I don't think any of them have the kind of monopoly that AT&T had, but Facebook might be close as they continue sinking their Facebook Connect hooks in. The trouble is that monopolies are not good or bad per se. Google and Facebook are still mostly innovating and adding value. At some point the landscape starts to change, and that's when they get scared and start getting anti-competitive and the balances start to tip. The tricky thing is determining when this is. Certainly the government is ill-equipped to figure it out, because it's all sound bites and popular opinion by an apathetic voter base. So the rationale for why a monopoly should be broken up gets sanded down to a slogan about monopolies being bad, and pretty soon politicians are jumping on the monopoly-busting bandwagon without any kind of legitimate rationale. This is why, I really value the old-school intellectual movement that Chomsky represents of standing outside and speaking truth to power. Even if a lot of his analysis is flawed and ideas ultimately wrong, the honesty with which he pursues them is admirable and we need many more like him to keep America honest. The rich won't do it (as a group they are too fearful), the powerful won't do it, and government is certainly too awash in lobbyists and bureaucracy to have any hope.

iwr 16y ago

Remember that the great monopoly to be broken up by anti-trust law was in fact a government-mandated one: AT&T. Without the government banning competition, AT&T would have been very much different in 1974 (the time of the divestiture).

wazoox 16y ago
Infrastructure companies are natural monopolies. I suspect that Google, Facebook, etc are actually natural monopolies, too. The problem with these monopolies is the same as with others : they capture excess money, which hinders innovation in the long run. Hint : I don't believe in the free-market la la land BS anyway.
- iwr 16y ago
  How do you reconcile that with the fact that it was illegal to compete with AT&T? Once upon a time, Altavista was The Search and MySpace was The Social Network.
  - wazoox 16y ago
    > How do you reconcile that with the fact that it was illegal to compete with AT&T? It was illegal for some reason, you know. > Once upon a time, Altavista was The Search and MySpace was The Social Network. They never quite reached the monopoly level, though.
    - iwr 16y ago
      It became illegal because competitor operators were a threat to AT&T. The government made a deal with them by giving them legal protection, getting some political control in return. Even after the divestiture, the Baby Bells had preferential treatment and received automatic mobile licenses when the technology appeared. Secondly, it's kind of silly to think about web monopolies when users can freely change operators. Google, Facebook etc have to work hard to maintain their users.
      - 16y ago

fauigerzigerk 16y ago

He makes some valid points, but what doesn't quite add up is that not all of these "monopolies" are built on network effects. Google search, for instance, doesn't benefit from network effects. Gmail doesn't benefit from network effects, nor does anything else that Google does (successfully). Of course Google benefits from its size in many ways but that's not the same kind of self feeding dynamic as a network effect. Amazon became big by selling books. Did publishers really say, hey, let's sell to the biggest online book store only? Would it be any more inconvenient for buyers to buy from a different online book store just because it was not the biggest? I don't think so. There is no network effect, just plain old economies of scale and the power of brands. Myspace was the biggest. Friendster was the biggest. Both in areas that clearly do benefit massively from network effects. So, I agree with the author on some points, but I think he plays down the "being better" part a little too much and he ignores substitution effects.

bryanlarsen 16y ago
Did we read the same article? The author definitely payed much less attention to "network effects" than most articles on this subject usually do, explaining that it is quite common for monopolies to be created for new technologies, as well as giving several other reasons, some of which you reiterated.
- fauigerzigerk 16y ago
  It appears to me that he explains the emergence of these monopolies almost exclusively with network effects: "Internet industries develop pretty much like any other industry that depends on a network: A single firm can dominate the market if the product becomes more valuable to each user as the number of users rises. Such networks have a natural tendency to grow, and that growth leads to dominance." and "Still, in a land where at least two mega-colas and two brands of diaper can duke it out indefinitely, why are there so many single-firm information markets? The explanation would seem to lie in the famous American preference for convenience. With networks, size brings convenience." Did you find any other explanation in the article?
  - 16y ago

julius_geezer 16y ago

Google is the only one I use constantly. I've been on Amazon this out of curiosity to see what people said about a book I disliked, but haven't bought anything from them in years. Facebook? No. Twitter? No.

mynameishere 16y ago

forgoing Facebook or Twitter means giving up whole categories of activity. Seriously? Twitter is one of the most plainly worthless websites every made and Facebook is a pure copycat of a copycat of a copycat.