By John Eberhard
I wanted to share some realizations I had recently about marketing using online companies that are monopolies.
First this is a quote from the book “The 11 Immutable Laws of Internet Branding” by Al Ries and Laura Ries.
“On the Internet, monopolies will rule. There is no room on the Internet for number two brands. The Internet will operate more like the computer software industry, in which every category tends to be dominated by a single brand.
“One of the many advantages of friction-free retailing is that there is no one in between the customer and the manufacturer taking their cut of the transaction. The price you pay for the lack of friction, however, is the virtual disappearance of the second brand.”
Some of the monopolies in Internet marketing are:
- Google for search engines
- Facebook for social networking sites
- Amazon for sale of books and other products
- eBay for online auctions
Let’s talk about Google for a minute. They offer lots of services, many of them free, from Gmail to Google Analytics to the Chrome browser. But the way they make their money is with Google Ads. And they make so much money with Google Ads that it funds all their other free activities.
So who competes with Google? Well there is Bing Ads, and they are really the only serious competitor. But Google really has the lion’s share of the marketshare, and Bing is a distant second.
Now what are the effects of having monopoly? Generally you can charge what you want, and you can deliver poor service, or you can even do things that are to the detriment of your customers. And what can the customers do? Basically nothing. If they need the product, you are the only game in town.
Whereas, if you have competitors, when you charge too much, they can charge less and take customers away. If you deliver lousy service or do things that hurt the customer, the competitor can offer better service without the liabilities. And some customers will go with the competitor. In other words, competition is good for the consumer. And it generally forces the first company to keep prices low and deliver better service and a better product.
Think about some of the industries where there is heavy competition, such as with cell phones, car rental, or computer equipment. You can see that they are competing on price, quality and service, and that competition is good for the consumer. If you get lousy service or the cell phone company keeps boosting up your bill, you can go somewhere else. And that affects the first company because they have to be competitive on all points.
I have been managing ad campaigns on Google Ads since 2005. In that time I have seen Google do the following:
- Remove the feature showing what keywords people used to reach your site, from Google Analytics. So the only way you could see that data is by paying to use Google Ads.
- Originally there were up to 10 advertisers shown on the Google search page, displayed in a narrow right hand column. A number of years ago Google changed this to only 3 advertisers at the top. This meant that if an advertiser wanted to be on page one, they had to outbid the other advertisers. This raised the bid prices astronomically that advertisers had to pay, and priced many companies out of the market.
- For years Google has waged a war against search engine optimization companies, with multiple actions designed to make it harder for companies to rank organically in the search results.
- Just recently Google added a new feature where, when you ask a question, they display an answer at the very top of the page that is not a link to an advertiser or an organic listing, but simply an answer to the question from the Google AI. This will hurt both organic listings results and paid clicks through Google Ads.
Google’s actual customer, who pays the bills for them, is the advertiser. But they have taken actions over the years that have hurt the advertiser, and there’s essentially nothing the advertiser can do about it. They can go to Bing Ads, but the number of public using Bing is much smaller.
And Google doesn’t care. Being a monopoly, they don’t have to care about the reaction of the buying public (the advertiser).
You can still advertise on Google successfully, but it works well only in certain situations. Basically you have to have:
- A high ticket product or service that you sell
- Fewer competitors in your industry or market (because more competitors drives the bid prices up)
You can also use one of their other options other than Google Search, like Google Display or YouTube ads, where the cost per click is much lower, or Google Local Service ads, where you pay by the lead.
I don’t see a solution for this problem in the short term, but I think eventually the US government will get involved, to break up Google like they did with AT&T.
Here are a couple of videos about this topic:
DOJ Sues Google over abuse of digital ad dominance
