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Monopoly Power on the Web
-- A Preliminary Investigation of Search Engines
Abstract:
E-Commerce challenges traditional approaches to assessing monopolistic practices due to the rapid rate of growth, rapid
change in technology, difficulty in assessing market share for information products like web sites, and high degree of interconnectivity and alliance formation among corporations.
This paper has provided a fundamental framework that integrates an economic and network perspective to understand IT markets. This
framework was applied to the search engine market. Critical characteristics of the search engine market (for the core 29 search engines), including major players, search
techniques, network structure, and market structure were assessed.
The findings indicate that despite an increasing number of search engines, there are barriers to entry, largely due to the
exponential growth in the number of web sites and the non-scalability of the current search technology. Older search engine sites tend typically to have more features to lock
in users. Using standard economic indicators (CR4=58% and HHI=1200), the industry looks perilously close to being plagued by anticompetitive practices. However, based on a
network adjusted HHI (NAHHI) constructed in this paper, its value, 798, suggests that there is less cause for concern.
Based on all indicators, it suggests
that Yahoo would be a contender. Other possible contenders are MSN and Netscape. On the
basis of results to date, I recommend that government investigate product bundling and
keep an eye on these three companies. The
combination of network theory and economic theory to study the search engine market, used
in this paper, is a particularly powerful approach for E-Commerce.
Keywords: Search Engines, Monopoly, Antitrust,
Information Technology Industry |
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