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markets and moats matter. Anyone can get revenue selling tomatoes, the problem with tomato farming is that there is no moat, you will not be able to sell at a p

markets and moats matter. Anyone can get revenue selling tomatoes, the problem with tomato farming is that there is no moat, you will not be able to sell at a price much higher than the next farmer down the street. If there were 100 good search engines the price for advertising would be 90% lower

bduerst 5y ago
>If there were 100 good search engines the price for advertising would be 90% lower Would it really be that much though? I thought search ads were auctions - i.e. competition for impressions/clicks directly correlates to the price of advertising. If you have search users distributed across 100 platforms, the competition for impressions/clicks is going to be super low on all platforms, but you'd have to advertise on 100 platforms to get the same level of engagement, adding it all back up but with 100 middle men this time.
jsnell 5y ago
> If there were 100 good search engines the price for advertising would be 90% lower Why do you think that? The revenue is determined by the number of searches showing ads, the click-through rate, and the cost per click. The total across all companies would clearly not change for the first two metrics. Would the cost per click change? Given it's determined by an auction, I don't see how it could change. If you have an incentive to bid $1 on an ad on a single site with 100x traffic, you'd be equally willing to bid $1 on each of 100 separate sites with 1x traffic.
- gitfan86 5y ago
  If competition existed company A would offer a better product than just cost-per-click. Then company B would offer another product better than company A, and so on. Google is like a person that owns the only road between two towns. You have to pay them until other people can build ferries or airports or trains. At which point you can exit the mentality of "we have to take this road and pay per drive"
  - jsnell 5y ago
    Sorry, that still makes no sense to me. Why would company B have to make a better product in reaction? They're not being impacted at all. Company A having more and cheaper ads certainly won't make any users switch from B to A. It also won't make any existing advertisers stop spending on ads on B and run more ads on A, since the ads on B must have been profitable at the current price, and those ads are reaching a different set of users than the ads on A. Is it possible that those cheaper ads could create more demand for ads somehow? It seems hard to believe it could. Either it's a search term that people were already willing to buy more expensive ads for, and are now just happy to pay less, or it's a search term that nobody was willing to bid even minimum price for. What's actually going to happen in your scenario is that company A loses 90% of their revenue, goes bankrupt, and their domain is sold for a fair price to Company B or one of the other 98 remaining competitors.
candiodari 5y ago
> If there were 100 good search engines the price for advertising would be 90% lower And the number of ads and hidden ads would be like Cable.
dragonwriter 5y ago
> If there were 100 good search engines the price for advertising would be 90% lower If there were 100 good search engines for end users, but opinions of different users on quality were highly correlated, the traffic would be very disproportionately on the one that was perceived as even very slightly better. And they’d make the bulk of the advertising dollars. And they’d have the bulk of the money to throw at improvements. And the next year, unless some competitor got more access to outside investment to make up for that, the gap would be bigger, they’d have even more of the search audience, and even more of the advertising money, etc.
- gitfan86 5y ago
  You are describing 99 shitty search engines and 1 good one.
  - dragonwriter 5y ago
    Sure, if “slighty worse that good” is “shitty”. When you can’t sell your slightly-less-good product for a lower price to make it value-competitive to slightly-more-good one, there’s very little reason for all the users not to go to the slightly-more-good one. With free services given away to get an advertising audience, that makes slight advantages very prone to positive feedback loops.

bduerst 5y ago

>If there were 100 good search engines the price for advertising would be 90% lower Would it really be that much though? I thought search ads were auctions - i.e. competition for impressions/clicks directly correlates to the price of advertising. If you have search users distributed across 100 platforms, the competition for impressions/clicks is going to be super low on all platforms, but you'd have to advertise on 100 platforms to get the same level of engagement, adding it all back up but with 100 middle men this time.

jsnell 5y ago

> If there were 100 good search engines the price for advertising would be 90% lower Why do you think that? The revenue is determined by the number of searches showing ads, the click-through rate, and the cost per click. The total across all companies would clearly not change for the first two metrics. Would the cost per click change? Given it's determined by an auction, I don't see how it could change. If you have an incentive to bid $1 on an ad on a single site with 100x traffic, you'd be equally willing to bid $1 on each of 100 separate sites with 1x traffic.

gitfan86 5y ago
If competition existed company A would offer a better product than just cost-per-click. Then company B would offer another product better than company A, and so on. Google is like a person that owns the only road between two towns. You have to pay them until other people can build ferries or airports or trains. At which point you can exit the mentality of "we have to take this road and pay per drive"
- jsnell 5y ago
  Sorry, that still makes no sense to me. Why would company B have to make a better product in reaction? They're not being impacted at all. Company A having more and cheaper ads certainly won't make any users switch from B to A. It also won't make any existing advertisers stop spending on ads on B and run more ads on A, since the ads on B must have been profitable at the current price, and those ads are reaching a different set of users than the ads on A. Is it possible that those cheaper ads could create more demand for ads somehow? It seems hard to believe it could. Either it's a search term that people were already willing to buy more expensive ads for, and are now just happy to pay less, or it's a search term that nobody was willing to bid even minimum price for. What's actually going to happen in your scenario is that company A loses 90% of their revenue, goes bankrupt, and their domain is sold for a fair price to Company B or one of the other 98 remaining competitors.

candiodari 5y ago

> If there were 100 good search engines the price for advertising would be 90% lower And the number of ads and hidden ads would be like Cable.

dragonwriter 5y ago

> If there were 100 good search engines the price for advertising would be 90% lower If there were 100 good search engines for end users, but opinions of different users on quality were highly correlated, the traffic would be very disproportionately on the one that was perceived as even very slightly better. And they’d make the bulk of the advertising dollars. And they’d have the bulk of the money to throw at improvements. And the next year, unless some competitor got more access to outside investment to make up for that, the gap would be bigger, they’d have even more of the search audience, and even more of the advertising money, etc.

gitfan86 5y ago
You are describing 99 shitty search engines and 1 good one.
- dragonwriter 5y ago
  Sure, if “slighty worse that good” is “shitty”. When you can’t sell your slightly-less-good product for a lower price to make it value-competitive to slightly-more-good one, there’s very little reason for all the users not to go to the slightly-more-good one. With free services given away to get an advertising audience, that makes slight advantages very prone to positive feedback loops.