243-Google at Risk

Google continues to dominate the search market. It commands about two-thirds of all the searches done on the internet. Its next closest rival is Microsoft’s Bing which, at 28% market share, includes its integration with Yahoo’s site. (See “Audio Tip #9: Introduction to Step 3 of the Basic Strategy Guide” on StrategyStreet.com.) Google’s dominance in this market has brought with it a disproportionate share of the spending on paid advertising. Google may be putting that premium position at risk.

Google has been investing heavily in developing its local search capability. It hopes to gain even more advertising dollars by making this investment. Now the problem. Some companies, who also specialize in local marketing have begun complaining that Google discriminates against their sites in favor of Google’s own local search results. This is a very dangerous development for Google. It risks its Reliability reputation.

Google’s competitors have had a difficult time gaining market share against Google. As competitors develop new Functions, Google simply copies them. Internet searchers have had little reason to shift from Google to other competitors, including Bing. In our terms, Google’s competitors are not able to take market share away from Google by “winning.” (See “Audio Tip #32: Introduction to Step 7 of the Basic Strategy Guide”) They have not been able to do anything unique that causes a substantial portion of customers to shift their searches to Google. Rather, most of the market share that shifts in this market today comes as the result of a “failure.” Google must fail to meet its searcher’s expectations in order for Bing and the other competitors to have a significant opportunity to gain market share.

Google may be creating this opportunity by risking a failure in Reliability. A searcher has to know that Google will provide the most relevant results. If Google offers up its own less relevant results ahead of other web sites’ more relevant results, Google will lose market share. (See “Audio Tip #72: Reliability Failures Among Outstanding Companies” on StrategyStreet.com.) Google’s actions in promoting its own results over more relevant results are equivalent to a retailer offering a customer a lower quality product over a higher quality product simply because the retailer makes more money with the lower quality product. After a while, customers catch on and defect to other retailers. A failure in Reliability is particularly troublesome because trust is so hard to rebuild.

Posted 1/13/10

Update:

Google has succeeded. Everyone else has failed.  Google has been the model of an effective industry leader. In objective tests conducted over the years, Google has proven to be less biased than its large competitors.  Over the years it has allowed competitors neither a price nor a Performance advantage opening to its customers. It’s market share continues to grow and is now largely unassailable.  According to Statista, at the end of 2021, Google held 86% of the worldwide search market, Microsoft’s Bing controlled 7%. Yahoo’s share was under 3%.

Google’s Reliability and Convenience advantages over its competitors swamps its much smaller competitors with Function advantages. This pattern holds in most developed markets. Bing continues to offer a few Function advantages over Google. In fact, a 2021 analysis revealed that several of the small search engines had some unique Function advantages over Google. The broader market seems to be largely oblivious to these Function differences.

Microsoft’s Bing was too late to the market. By the time it entered Google had nearly total control over the industry’s Reliability and Convenience advantages. HERE is a video describing what you might expect in a mature market or one dominated by a single competitor.

11/22

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