“The source of Google’s competitive advantage is learning by doing,” said Hal R. Varian, Google’s chief economist.
In the Internet marketplace, Mr. Varian notes, users can easily switch to another search engine by typing in another Web address, so there is no tight technology control, as there is with proprietary PC software. Similarly, Mr. Varian says, advertisers and publishers can switch fairly easily to rival ad networks operated by Yahoo, Microsoft and others.
But economists and analysts point out that Google does indeed have network advantages that present formidable obstacles to rivals. The “experience effects,” they say, of users and advertisers familiar with Google’s services make them less likely to switch. There is, for example, a sizable cottage industry of experts who tailor Web sites to get higher rankings on search engines, which drive user traffic and thus ad revenues. These experts understandably focus their efforts on the market leader, Google — another network effect, analysts say.
Steve Lohr, "Google, Zen Master of the Market," New York Times, 7 July 2008, www.nytimes.com/2008/07/07/technology/07google.html. Via Items shared by Robert Scoble.
