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> You can make a case that Web search is a natural monopoly. Thoughtful article, great writing but help me here: How can a natural monopoly (what ever that mea

> You can make a case that Web search is a natural monopoly. Thoughtful article, great writing but help me here: How can a natural monopoly (what ever that means) ever be a good thing? Imagine if we'd let one company extract, refine and distribute all oil. Or even a monopoly for any one of those three.

jxf 6y ago
That's not really what a natural monopoly is. In a natural monopoly, the high barrier to entry means it's essentially wasteful to encourage competition. For example, imagine operating the first power plant in a desert region. If it's expensive to set up power plants, then there won't be much point in encouraging competition; no one else will want to set up one. The operators of the power plant have a natural monopoly. It would be better to spend the resources required for a second power plant on servicing customers elsewhere instead of fighting over the same territory — so the monopoly is "good" in the sense that it disincentivizes a bad allocation of capital. Generally, natural monopolies get regulated (e.g. a power authority blessed by the local government operates the power plant instead of a private firm).
ericmay 6y ago
Colin - a natural monopoly is a pretty well-known economic concept. Essentially, you’re able to form a monopolistic business just by the nature of the business itself - you don’t have to conduct anti-competitive practices or buy out your competitors. For Search it’s straightforward. The more people who search on your platform, the better the results get. Eventually competitors can’t really emerge because the product is too good. This also happens with low costs as well at certain economies of scale. My argument against breaking up Google would be they face search competition via Amazon, Facebook, and even Apple. But I can see both sides here. That’s what makes it an interesting case!
zaphar 6y ago
How can a natural monopoly (what ever that means) ever be a good thing? The whole point of something being a natural monopoly is that it doesn't matter if it's good or bad. No matter what you do one company will tend to win it all over time. So in order to control such things the government (another natural monopoly) has to step in and put fences around the monopoly.
- ColinHayhurst 6y ago
  Fair point. The Sherman Act should deal with such control. We'll see!
pdkl95 6y ago
> (what ever that means) https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly > How can a natural monopoly (what ever that means) ever be a good thing? Regulating the local phone company responsible for "last mile" wiring as a natural monopoly is why telephone poles no longer look like this: https://i.pinimg.com/originals/ea/a8/84/eaa884f82bb111c77c4b661753bb8529.jpg https://i.pinimg.com/originals/ea/a8/84/eaa884f82bb111c77c4b... Also, you probably don't want construction crews digging up your street every time a neighbor decides to switch to a competing water/sewer service. edit: grammar
- ColinHayhurst 6y ago
  Thanks for the Wikipedia link; should've have Googled/Binged/Mojeeked it! We can have an interesting debate about whether "capital costs predominate". Many have said here they do for crawling/indexing. I don't think that's so clear
AJ007 6y ago
I disagree with multiple things he said here under the natural monopoly paragraph in terms of cost and capex. Clearly that is a lower barrier today than it was 20 years ago. Bing, Yandex, Duckduckgo* do as good of a job and in some cases much better as Google hamstrings their results. There are vertical markets where other search engines have been doing a better job for over a decade, such as Indeed. (In which case Google leveraging themselves in to those verticals and destroying those businesses for a few extra dollars in very egregious.) The bigger issue, I believe, is that Google, in its present form in 2020, is not a search engine. It is an ad delivery engine supplemented by organic results which they really do not want users clicking on. The bulk of the searches normal users perform are served ads and those users click on those ads. Really no analogy here close to something like power lines, a sewer system, or roads.

jxf 6y ago

That's not really what a natural monopoly is. In a natural monopoly, the high barrier to entry means it's essentially wasteful to encourage competition. For example, imagine operating the first power plant in a desert region. If it's expensive to set up power plants, then there won't be much point in encouraging competition; no one else will want to set up one. The operators of the power plant have a natural monopoly. It would be better to spend the resources required for a second power plant on servicing customers elsewhere instead of fighting over the same territory — so the monopoly is "good" in the sense that it disincentivizes a bad allocation of capital. Generally, natural monopolies get regulated (e.g. a power authority blessed by the local government operates the power plant instead of a private firm).

ericmay 6y ago

Colin - a natural monopoly is a pretty well-known economic concept. Essentially, you’re able to form a monopolistic business just by the nature of the business itself - you don’t have to conduct anti-competitive practices or buy out your competitors. For Search it’s straightforward. The more people who search on your platform, the better the results get. Eventually competitors can’t really emerge because the product is too good. This also happens with low costs as well at certain economies of scale. My argument against breaking up Google would be they face search competition via Amazon, Facebook, and even Apple. But I can see both sides here. That’s what makes it an interesting case!

zaphar 6y ago

How can a natural monopoly (what ever that means) ever be a good thing? The whole point of something being a natural monopoly is that it doesn't matter if it's good or bad. No matter what you do one company will tend to win it all over time. So in order to control such things the government (another natural monopoly) has to step in and put fences around the monopoly.

ColinHayhurst 6y ago
Fair point. The Sherman Act should deal with such control. We'll see!

pdkl95 6y ago

> (what ever that means) https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly > How can a natural monopoly (what ever that means) ever be a good thing? Regulating the local phone company responsible for "last mile" wiring as a natural monopoly is why telephone poles no longer look like this: https://i.pinimg.com/originals/ea/a8/84/eaa884f82bb111c77c4b661753bb8529.jpg https://i.pinimg.com/originals/ea/a8/84/eaa884f82bb111c77c4b... Also, you probably don't want construction crews digging up your street every time a neighbor decides to switch to a competing water/sewer service. edit: grammar

ColinHayhurst 6y ago
Thanks for the Wikipedia link; should've have Googled/Binged/Mojeeked it! We can have an interesting debate about whether "capital costs predominate". Many have said here they do for crawling/indexing. I don't think that's so clear

AJ007 6y ago

I disagree with multiple things he said here under the natural monopoly paragraph in terms of cost and capex. Clearly that is a lower barrier today than it was 20 years ago. Bing, Yandex, Duckduckgo* do as good of a job and in some cases much better as Google hamstrings their results. There are vertical markets where other search engines have been doing a better job for over a decade, such as Indeed. (In which case Google leveraging themselves in to those verticals and destroying those businesses for a few extra dollars in very egregious.) The bigger issue, I believe, is that Google, in its present form in 2020, is not a search engine. It is an ad delivery engine supplemented by organic results which they really do not want users clicking on. The bulk of the searches normal users perform are served ads and those users click on those ads. Really no analogy here close to something like power lines, a sewer system, or roads.