No switching cost - no monopoly?

Google surely loses no opportunity to drum the message that they are the leading search company primarily because of their genius engineers  solving hard computer science problems.

No doubt this propaganda is great for their hiring engine. Which computer science undergraduate wouldn't want to solve 'hard problems' and get paid a lot doing it while getting fat on the gourmet snacks?.I have to commend them on this marketing stunt. And they promptly justify why they need to continue doing  this for the foreseeable future - because search has practically zero switching costs for the user, therefore Google has to remain significantly better off than competitors if it wants to be the leader in search.The argument is also used to potentially ward off antitrust  allegations. Competition is only a click away. 

 

Recently Google's chief economist Hal Varian tried to explain on his NY times column and a post on the official Google blog on why Google was successful .He talks about  kaizen -  the Japanese product development methodology of continuous improvement. Google's billion queries a month give it ample data to improve the algorithm. Sure all this helps Google  stay ahead and the messaging certainly does help win with antitrust regulators.But why doesn't anyone care to point out that their dominant share in  search is not as easy to out perform as they claim it is - build a better search engine and users will come flocking to you because search is a 1 click switching cost business.No!There is something called Network effect  and Google benefits from many network effects to the extent that breaking their monopoly is not as simple as doing a better search engine. Looks like their internal propaganda got Hal too.

Network effect or demand side economies of scale happens when the product's utility improves as more people use it. Lot of products to name which have benefited from the network effect - the telephone, fax machine, Windows, social networking and search.

Google's network effect? Here is how

A better search engine - more users - better trained algorithm.

A better search engine - more users - more advertisers - more tools and SEO -> more advertisers -> more users because of better targeted ads.

10 years ago when 2 PhD students came up with a great search engine they were at the right place at the right time. Network effects compounded from then on to make them the leader in search.

When demand side economies of scale work in your favour it is good enough to be only marginally better off than the rest of the pack.The 'low switching cost'  actually works in Google's favour here. After all why would the end user switch to another search engine even if it is just 0.05% worse off than Google, when Google is just a click away and the users have all the network effects accruing to them.

 

So is Google's market share solely because it out executes everyone else on sheer engineering brilliance? You got to be kidding yourself. Network effects  of the search economics and the serendipity to hitch a ride on it at the appropriate time have played a bigger role than Google would have you believe.  How do you think Microsoft got what it has with Windows today?

Chance discovery

There are phases when I get immersed by a television show for months and hunt down all episodes and watch them.First it was Curb Your Enthusiasm,then Seinfeld and then The Office and currently Prison Break . Curb has just finished season  6 so I decided to try searching for it on torrents. Before I continue with the next sentence, let me state that I cannot wait to get my hands on a DVD.I am a true fan of Larry David and would support his comedy by buying original stuff whenever I can. I bought first 3 seasons and now am looking for season 6. But until then long live torrents. So while looking for reviews and fan mails I found this site

http://larrydavidfan.com/ 

Finally someone decided to put all things related to the comic genius in one place. The thing I like about his comedy (both Seinfeld and Curb) is the twists he lends to everyday events which make it really funny. The Christ nail or the dropping a Junior mint into the patient in the operating theatre.. His mind is still fertile for 3 more seasons of Curb I hear. Bring it on!!

Race or mother

Sometimes I have to admit that Indians are more liberal when it comes to dealing with race and caste , the latter which is sometimes passionately held and protected by its members. With so many castes/sub-castes and sub sects in India, its a miracle that we live as one country.A certain Australian cricketer  raises a hue and cry about being called a 'monkey'  which he claims is a racist abuse. Aren't we all descendants of that mammal family irrespective of colour?  The irony is that the Australians are pacified when they come to learn that he actually heard it wrong and the actual abuse was a common Hindi expletive  referring to his mother's ---- No, I am not putting blanks because I do not want to offend the readers of the blog by mentioning something profane.It is actually a literal translation. Fill the blanks yourself  Mr   'Abusee'. On of the creative expletives which gives a choice to the receiver of the abuse. Strangely the Australians were relieved that its only a reference to the cricketer's mother and not the entire race. So let there be peace. 

I hear on FM radio that the two protagonists in the incident will soon be  seen together in a television commercial  . Is it going to be an ad for Tata Indicom? Kajol would probably step in and ask Bhajji ,who is getting frustrated yelling the Hindi expletive at the Australian, to throw the existing connection  and get a Tata Indicom connection so that the person at the other can can clearly hear the abuse and be convinced its not racist.