5 ms·

Android and the natural economics of digital goods

28 points by grellas 16y ago

rbarooah 16y ago
It's a good analysis. One which points to a bleak future in which all work is done by employees of a few monopolistic corporations that defend themselves against competition by giving "good enough" clones of their competitors products away for free. It seems like an effective strategy for defeating competiton and stifling disruptive innovation. I sincerely hope it fails.
- VB6_Foreverr 16y ago
  Before the world wide web's significance became apparent that's how it looked with Microsoft and Windows. IBM -> MS -> Google -> Facebook -> ?
  - rbarooah 16y ago
    Yes - the fact that it keeps happening does provide support for the grim outlook.
- praptak 16y ago
  "[...] monopolistic corporations that defend themselves against competition by giving "good enough" clones of their competitors products away for free." I don't quite get how does this apply to Google. Who exactly is that competition and how do they threaten Google? To me it seems like they're defending against Microsoft-like tactics when someone owns a part of the path between Google and its users (the browser, OS) and tries to leverage that to harm Google's business. I don't see how what Google does stifles innovation.
  - rbarooah 16y ago
    You will when if Google decides they're afraid of your product giving you some leverage and decides to give a clone away for free to undermine it's value and damage your business. Exactly the strategy that Microsoft used to destroy Netscape. It stifles innovation because they don't need to do the hard work to advance the state of the art. They just need to copy the work that's already been done and let the free price and privileged advertising position do the rest. It's good for Google, but bad for the rest of us. You can say 'but don't users benefit from getting stuff for free?'. Well yes in a way, but we all lose because of the stagnation it causes. Again, pretty similar to what Microsoft has done in the past. It may be very hard for corporations that have a quasi-monopoly to avoid falling into this pattern in general.
- jsnell 16y ago
  I find your comment a bit strange, since the article is actually suggesting the opposite. The thesis of the article is that Android and Chrome are already profitable businesses thanks to increased search revenue, not merely strategic projects. So they're exactly the opposite of spoiler moves that are trying to undercut a competitor's business. Of course it's easy enough to find examples of the latter in the tech world.
endlessvoid94 16y ago
It seems to me that "elevating the value of the castle" goods is precisely what Warren Buffett said. He looks for the castles with surrounding moats because they're valuable. I don't really understand what this article adds to the discussion.
extension 16y ago
How is Google entrenched in search? It's entirely feasible to build a competitive product and there are a few out there. Nothing locks their users in. Switching is no technical trouble, nothing needs to be relearned, and there's no risk. Android weakly complements search, by making it the default, but it's still easy to switch if one actually cares. And they don't have complete control of the platform. Really, they are just running on brand recognition from being uncontested for so long, and arguably still. That's not a moat, that's just a really nice castle.
- Ruudjah 16y ago
  It's not just the search, it's the search with the economic model. The network effect and the volume that gives Google a castle. I can take a crawler, indexer and server and have a competitor up tomorrow. But I don't have cheap bandwidth (Google has datacenters in most countries, giving them a cost advantage, local traffic only), a scalable infra, and the advertising network.
- tomjen3 16y ago
  I have spent the last month testing DuckDuckGo as an alternative to having Google as a default search engine. While I am hugely impressed with the quality of search a one man company can get, I am not impressed with DuckDuckGos results compared to Googles. It works okay for many searches but it sucks a really long-tail queries and its "zero click" information thingy has serious problems distinguishing between the relevant results when more than one is potentially relevant (search for "black swan". The most likely result, the recent movie, isn't even listed though an ancient one from 1942 is or search for "castle" which would normally give the time and tv-station that program is one, except it confuse it with some BBC documentary).
- abdulla 16y ago
  I'd argue that it's not search at all. It's ads. If you make things free, then your competitors have to also bring their prices down or remove all cost. To then pay for their service, or augment their revenue, they need ads. Which Google can provide --- possibly at a greater monetary value, with better tools, and farther reach than any other ad provider.

28 points by grellas 16y ago

It's a good analysis. One which points to a bleak future in which all work is done by employees of a few monopolistic corporations that defend themselves against competition by giving "good enough" clones of their competitors products away for free. It seems like an effective strategy for defeating competiton and stifling disruptive innovation. I sincerely hope it fails.

VB6_Foreverr 16y ago
Before the world wide web's significance became apparent that's how it looked with Microsoft and Windows. IBM -> MS -> Google -> Facebook -> ?
- rbarooah 16y ago
  Yes - the fact that it keeps happening does provide support for the grim outlook.
praptak 16y ago
"[...] monopolistic corporations that defend themselves against competition by giving "good enough" clones of their competitors products away for free." I don't quite get how does this apply to Google. Who exactly is that competition and how do they threaten Google? To me it seems like they're defending against Microsoft-like tactics when someone owns a part of the path between Google and its users (the browser, OS) and tries to leverage that to harm Google's business. I don't see how what Google does stifles innovation.
- rbarooah 16y ago
  You will when if Google decides they're afraid of your product giving you some leverage and decides to give a clone away for free to undermine it's value and damage your business. Exactly the strategy that Microsoft used to destroy Netscape. It stifles innovation because they don't need to do the hard work to advance the state of the art. They just need to copy the work that's already been done and let the free price and privileged advertising position do the rest. It's good for Google, but bad for the rest of us. You can say 'but don't users benefit from getting stuff for free?'. Well yes in a way, but we all lose because of the stagnation it causes. Again, pretty similar to what Microsoft has done in the past. It may be very hard for corporations that have a quasi-monopoly to avoid falling into this pattern in general.
jsnell 16y ago
I find your comment a bit strange, since the article is actually suggesting the opposite. The thesis of the article is that Android and Chrome are already profitable businesses thanks to increased search revenue, not merely strategic projects. So they're exactly the opposite of spoiler moves that are trying to undercut a competitor's business. Of course it's easy enough to find examples of the latter in the tech world.

endlessvoid94 16y ago

It seems to me that "elevating the value of the castle" goods is precisely what Warren Buffett said. He looks for the castles with surrounding moats because they're valuable. I don't really understand what this article adds to the discussion.

extension 16y ago

How is Google entrenched in search? It's entirely feasible to build a competitive product and there are a few out there. Nothing locks their users in. Switching is no technical trouble, nothing needs to be relearned, and there's no risk. Android weakly complements search, by making it the default, but it's still easy to switch if one actually cares. And they don't have complete control of the platform. Really, they are just running on brand recognition from being uncontested for so long, and arguably still. That's not a moat, that's just a really nice castle.

Ruudjah 16y ago
It's not just the search, it's the search with the economic model. The network effect and the volume that gives Google a castle. I can take a crawler, indexer and server and have a competitor up tomorrow. But I don't have cheap bandwidth (Google has datacenters in most countries, giving them a cost advantage, local traffic only), a scalable infra, and the advertising network.
tomjen3 16y ago
I have spent the last month testing DuckDuckGo as an alternative to having Google as a default search engine. While I am hugely impressed with the quality of search a one man company can get, I am not impressed with DuckDuckGos results compared to Googles. It works okay for many searches but it sucks a really long-tail queries and its "zero click" information thingy has serious problems distinguishing between the relevant results when more than one is potentially relevant (search for "black swan". The most likely result, the recent movie, isn't even listed though an ancient one from 1942 is or search for "castle" which would normally give the time and tv-station that program is one, except it confuse it with some BBC documentary).
abdulla 16y ago
I'd argue that it's not search at all. It's ads. If you make things free, then your competitors have to also bring their prices down or remove all cost. To then pay for their service, or augment their revenue, they need ads. Which Google can provide --- possibly at a greater monetary value, with better tools, and farther reach than any other ad provider.