The New Monopolies

Just a quick post on something I’ve been thinking about in the last few weeks. With my publishing project, I’ve had a more first person experience with some of the big monoliths in today’s world—Google (AdWords specifically), Amazon, and Facebook, though a friend took on the Facebook role as it was an odd fit for me and not something I had time for in any case.

I have to admit to being in awe of the reach of these big companies that have become so important in our lives so quickly. I won’t go into all the very real benefits they’ve brought because we know what they are. But the smaller comment I want to make is that in a service age, these are not outfits that are particularly good at helping the people who use them. They count on users to know what they’re doing or to figure it out. For instance it’s easy enough to sign up for AdWords in hopes of a marketing boost. For a person who doesn’t have a starting knowledge of all the kinds of data it generates and how to use it effectively, it’s tough and time-consuming to figure out all the ins and outs of how it works and if it works, even if you check on it daily.

With Amazon KDP, you can upload things quickly but if you hit submit before you should, you won’t be able to fix a mistake with the same speed. If you send an email for help, you’ll hear back, but not quickly. As often as not, it’s assumed you’ll have your questions answered in forums by other people who’re also trying to navigate the system. I know very little about Facebook, but I have learned that there’s not a lot of software flexibility. You can have five pictures at the top of your page, or you can have five pictures at the top of your page. If you mistakenly link your page to another page, it’s apparently stuck that way.

My personal concern is with what’s essentially customer service, although it feels bigger than that. When an outfit is as huge and dominant as any of these are and still seeking to expand its reach, even if it’s relatively new in the marketplace, it’s still a monopoly with all the dangers that implies. We love the services and sometimes breathtaking opportunities we get from companies like this, but in some fundamental ways, I think we should be wary. I’m just not sure how.

11 Responses

  1. They are big, but they aren't monopolies. Indeed, Amazon operates in a hugely competitive space, and then lets all their competitors sell on Amazon. While as a small vendor you have no voice (a customer does an A to Z on you, it really doesn't matter if they got and used your product and love it and you have pictures of them using it and loving it, Amazon will give them their money back and take it from you), they operate in a very competitive space, they just do it better. Same with Google. There are several major search engines (Microsoft keeps pouring millions into still-unprofitable Bing), Google just happens to do a lot of better than the competitors. They are also offer the best price-performance metric: if you're trying to sell product online, you can end up spending a lot with Google, but you often get results for that money. Google has a lot of competitors in the space, including Yahoo! shopping, Bing, Shopping.com, PriceGrabber, PriceWatch, and many others. You can spend a lot of money with these folks, and get no or paltry results compared to AdWords. Still, there's room for lower cost alternatives, it's just very expensive for any company just starting off to develop the infrastructure for serving ads and attracting eyeballs while at the same time undercutting the competition on price. But that possibility is always there . . . I'm tired of Google, and feel about it the same way Winston Churchill did about Democracy. It's the word search engine/ad platform every invented, except for all others ever tried. As a small vendor coming to stake your claim on the Internet, however, AdWords + Shopping.com + PriceGrabber + Yahoo! Shopping amounts to a huge barrier to entry. It terms of both cost, and the byzantine systems for using these services, and then the extremely high expense of not knowing how to manage your campaigns (hint: the more specific your terms are to your product in AdWords, the better off you are: categorical terms become very expensive and produce no results, unless your Amazon or eBay or McDonalds). Of course, these companies are in the business of making money, not removing barriers to entry so every creative person can not just sell their product on the Internet (really, and extremely easy thing for anyone to do at this point), but attract an audience and make money (both things still being fairly difficult). Of course, even if you just think of the big brands, we're still talking oligopolies, not monopolies. Facebook is competing with Google, and Google with Facebook. Amazon is competing with Apple and Netflix. Google is competing with Apple. There is very serious competition out there, but the marketplace is such now that the cost for entry is billions of dollars. I've actually got an idea for a better search engine (and have had, and Google is sort of going in that direction, but doing it with Google plus, and I still my idea would make for a better search enginge, but . . . I don't have the coupla billion in capital it would take to compete in the space with Google, Yahoo and Bing.

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  2. Also, from long experience with AdWords, I was always frustrated by a policy of theirs (or a business rule, if you prefer) which turned off words with low display rates. That is, say your search term was a part# for a 20 year old computer: AFG1000W-6BF. Well, you get 1 search on that term every 2 or 3 months, but ever search gets a click and turns into a sale for you. And Google makes whatever you're bidding on that term: a quarter, 50¢, a dollar, whatever. Because it's rarely searched, Google automatically prevents those words from showing up . . . even when someone specifically enters that exact term. In essence, disabling your search term.I understand it's maybe a bid to get low-search term bids up into the tens or hundreds of dollars (per click), but most people with obscure campaign search terms can't bid like that. So, Google just passed on 10,000 one-off 25¢ clicks. And keeps company X from selling their stock of motherboards for a 20 year old computer. I just don't get that.

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  3. Kevin, I'll concede what you like on terminology. My main point is that even if these companies have competitors, they're still so dominant they don't have to dig deeper in their offerings so they can give more meaningful services to their customers. And as you say, people who might want to do more niche services can't afford the startup prices with such big players out there. I just see this as a variation on the old idea that bigger offers advantages of scale and some real downsides.

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  4. "My main point is that even if these companies have competitors, they're still so dominant they don't have to dig deeper in their offerings so they can give more meaningful services to their customers."Agreed! I've been there. I started in 2002 with a company that sold through eBay, Half.com and Amazon (Google AdWords was not really an option at the time, although I was the impetus behind getting us on Froogle, which eventually became Google Shopping). Then worked for a software and hardware vendor and then a medical supplies vendor that attempted, without much luck, to sell through Amazon (think it's hard for a regular joe, try selling medical supplies), but had a number of AdWords campaigns (hundreds of them, with tens-of-thousands of search terms). We'd spend $5k or $10k or more with them a month–did they care what we thought about anything? Nope. Note my complaint about AdWords excluding high-quality bids that get few actual searches. That's just crazy, IMO–and talk about actively taking away a meaningful service for both their customers, and just regular joes out searching for obscure things they need. But . . . they get to sell what they want to sell. I can't make them sell me something (until the Supreme Court extends eminent domain to big Internet companies), and part of it is just the free market–if every customer was clamoring for something, Google would (eventually) respond in some manner. If it's just 10% of us? Then we can f*** off, Google finds that kind of money lodged in their own buttcrack everytime they go to the bathroom. 😉 I also worked for a company that for years attempted to sell a product to Wal-Mart (and, early on, we actually did sell one product to them, once). Size lets them treat their vendors poorly, and also allows them to put small vendors out of business (admittedly, in deals-with-the-devil that you know can be bad for you, but you've got to agree to if you want your chance to sell at Wal-Mart). But selling to large retail chains is far more byzantine than selling on Half.com or Amazon or setting up an AdWords campaign. So . . . things are getting better, and the little guy definitely has better access to a much broader market, thanks to Amazon and Google and the rest of them.But could it be a lot better? Without question. A whole lot better. Hopefully, it will go there, but like regular evolution, market evolution can be very slow and plodding. And sometimes companies or processes die out, taking the good with the bad, and it has to all start over again.I'm rambling. Got a loooong day ahead of me. Catch you guys later!

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  5. “The little guy definitely has better access to a much broader markets, thanks to Amazon and Google and the rest of them.”This is definitely right. That’s why they’re so attractive. I just don’t think we can assume that because they start from this kind of business model—there was obviously a huge, untapped need—the ultimate results will be benign. What Amazon is doing in publishing is broadening distribution upfront, which is long overdue, but with less benign things already in the works. The assumption may be that the little guy will be happy with something rather than nothing, but it’s a little scary how much control they already exert over the process and with ambitions of bypassing standard publishing channels at every phase of the operation. This isn’t just happening from benevolence and if other precedents fit, will ultimately damage competition openness from sheer size and reach.

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  6. Your post and comments [KW and ABC] introduced me to a world about which I know little. Thanks.I am moderately computer literate – build my own, network the office myself, run a linux server on my own – but I have avoided social networking and never tried to "sell" anything online except at Craigslist. So, again, thanks for the window on another world.

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  7. ABC: "the ultimate results will be benign"I think like many things, the ultimate results with be benign-ish. Not perfect, and with definite negatives. My experience with publishing is limited, but I can't see what Amazon is doing being remotely as bad was publishers have been doing to authors for years. 😉 But, that's observed at a distance. "and with ambitions of bypassing standard publishing channels at every phase of the operation"I think this is generally healthy, although it's usually a rough start for everybody, as it turns out not everything can be eliminated or bypassed. If you're running a Linux server on your own, you're a little more than moderated computer literate. "This isn’t just happening from benevolence and if other precedents fit, will ultimately damage competition openness from sheer size and reach."It certainly can. That's why I like the fact that in streaming movies and content Amazon is competing with (and sometimes cooperating with while competing with) Netflix and Hulu and Epix and others. Amazon is competing in .mp3 sales with Apple. iBooks and other publishing platforms are competing with Amazon. If Amazon takes the big chunk of that market, I'm not terribly concerned about that, but as I get older, I'm not a big fan of mergers. When it comes down to it, most merger and acquisitions, particularly of competitors, tends to simply limit competition, and rarely to the benefit of customers and vendors. Big is not necessarily bad, but I think it's good to have multiple large vendors in a space (I don't particularly want to see Google buying Yahoo!–not up to me, I know, but if my opinion was asked . . . I would rather Amazon and eBay stay separate, I'd rather see AT&T unable to acquire T-Mobile, etc). Unless it's unavoidable–I don't see how satellite radio could be anything but a monopoly. Unless the government nationalized it.

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  8. BTW, you want to talk monopoly, let's talk First Data and Paypal. It's very difficult to be in business without accepting credit cards online (First) or Paypal, and frequently these companies kill startups and either put people out of business or force them into bankruptcy by holding on to their money (so, you sell $100k of merchandise, and ship it out, and you've paid for it, but Paypal or your bank (Bank of America, Wells Fargo) decides you had too many chargebacks last month and your sales have been going up to fast, so they need to hold on to $100k of your money, not releasing it to you, in order to make sure you're not trying to defraud them (fair enough) or something. Then, despite having been successful at making sales, you now have no operating capital, can't make payroll, can't replenish inventory, sales go down, Paypal or Wells Fargo get worried, now they definitely won't release your money . . . That's just one scenario. There are dozens of them. Another great one is where First Data decides to stop taking credit cards on your behalf, and you have no way to take orders until whatever worried them (sometimes nothing, just their error) is resolved, at which point you lose business and have lost money in marketing, etc., to get clicks that cannot be converted to sales because you can't take credit cards . . . Paypal (it might surprise some people to hear) is highly consumer-centric. Which means if you want to fraudulently order a lot of stuff with real money, and receive all that stuff, and then do a chargeback on the company you purchased it from so you get all your money back and get to keep the stuff, Paypal is the way to do it. Paypal would take money out of our bank account to compensate clearly fraudulent claims (or just plain wrong ones–where the customer got the product, used it, broke it or decided they didn't like it, and did a chargeback). Don't like checking your bank account and you're $2000 short because Paypal arbitrarily debited you for something where the "customer" is clearly taking advantage of the system? Too bad! You prepared to sue Paypal? Go ahead. Have fun. A better way to pay and get paid online would be nice. Especially for small internet retailers.

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  9. One more point on this, Kevin. I think PayPal is the perfect example of the sort of monopoly-like thing that concerns me. (I've heard of them putting holds on seller accounts after bogus complaints, many from Asia.) But just one more bit on Amazon. They've now added free lending of Kindle books, one title a month, for Amazon Prime subscribers. It's for selected titles and the big six publishers aren't in. But the way it's set up, publishers get a flat fee for a title regardless of how well it performs. It could very well turn out to be a big subsidy for Amazon as they use it as a premium to get more Amazon Prime customers, but a very bad deal for both publishers (most of them small or independent) and authors. Yet it's the deal that's out there, and the Nook and other ereaders haven't become really serious competitors to Kindle at this point. In some ways, Amazon deals are the only deals.

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  10. "Yet it's the deal that's out there, and the Nook and other ereaders haven't become really serious competitors to Kindle at this point."I doubt they will. Kindle is, in fact, going to end up owning the Android Tablet space, meaning that it's going to be Kindle Fire and iPad in the tablet space (at least for the next few years), with a lot of play tablets and also rans. Still, in the end, I'm a fan of the Kindle lending program. I've bought several ebooks, but my wife, who reads 20 times what I do, hasn't bought one. She gets everything from the library. If she could finally be part of a program that lends some books (one a month isn't necessarily the answer), I'm all for it. There needs to be a way to borrow books on Kindles . . . I buy all my ebooks on iBook, on the iPad. I just like the idea of having all my book purchases associated with my iTunes account, and I buy a book every two months, generally. It could also be a not so bad deal for some publishers and some authors–especially if it leads to useful exposure for future sales. Still . . . Amazon is something of a leviathan, authors and publishers are right to be wary!

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  11. It is possible to borrow from Kindle. Publishers and authors can enable Kindle books for lending, and some libraries now have ebook lending programs. I think it's a really good idea, and it means wider circulation for books. The problem I see with the Amazon Prime link is the flat fee. If a book does extremely well in terms of readership on Kindle loans to AP customers, the publisher (and by extension the author) just get that flat fee and Amazon cleans up.

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