Posted: 2020-10-31 11:19:59
Market definitions and tech monopolies
From Benedict Evans at Essays - Benedict Evans
Originally published 2020 10 31
The big shifts in dominance in tech in the last few decades have not generally come from a new product that does the same thing as the old one, but from a company doing something that changes the field of play. Microsoft didn’t overturn IBM’s dominance of mainframes - instead, PCs made mainframes irrelevant. Google didn’t make a new Windows, and Facebook didn’t take on Google at web search - instead, they carved out something new. Going back to Amazon, you can see exactly this issue in the explosive growth of Shopify. It’s come from nowhere to do $60bn of GMV in 2019 and has already done close to $80bn in the first three quarters of this year. Shopify isn’t the same thing as Amazon (or indeed eBay). It’s not beating Amazon at doing Amazon, any more than Microsoft beat IBM at doing IBM - it’s doing something adjacent, and different, but deeply competitive. Tiktok is also doing this to Youtube now - Tiktok is not YouTube but it’s a much bigger question than DailyMotion. The threat comes from things that don’t fit inside a straightforward market definition.
Looking then at Google and Facebook, no-one would dispute that Google has 80-90% of web search (and this is true everywhere outside China), and Facebook and Google combined have half to two thirds of online ad spending. Online advertising is now about $250bn and total advertising is $500bn or so, and total marketing is $1tr. You could try to argue for a broad, $1tr market definition, but for most of Google and Facebook’s advertisers, online is the market - they’re not going to run a TV campaign. This seems like an easy definition. Instead, the interesting argument comes when Google’s lawyer says that the competition in search isn’t Bing, but Amazon, and Facebook, and that the next threat is what Apple does with privacy on iOS. The government’s lawyer would laugh and say ‘that’s what everyone says!’ - and this would be true, but that wouldn’t mean the Google lawyer didn’t have a point. What do we think Sundar Pichai spends more time thinking about - whether Bing will catch up, or how far Amazon moves up the sales funnel and displaces product purchasing away from general web search entirely? How much does he look at DuckDuckGo and how much does he look at Pinterest?
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