On Google’s Franchise (and McCormick’s)
Wednesday, December 10th, 2008Google has a competitive advantage. In fact, one might even say that it has a franchise in web search. I would not say that. I mean, Google has a franchise, but does not have a monopoly on web search and never will. There are real problems with the Google model that is often overlooked. It becomes a poor job of finding some sites that are difficult to describe in keywords. For this reason, there may still be a market for searching the Web in the form of specialized niche directories and in some of these “social search engine” (for example, Stumble Upon) for many years to come.
I am not suggesting any of these services will be as successful as Google, I am sure that it will not. I am simply pointing out that there is a difference between a need and the means by which it is necessary to comply with its demands. While the dominant player in search, Google will only have a franchise in the media (keyword search) will not have a franchise in need (to find things on the web). In addition, Google can not, at present, rightly be called the dominant player in search. There is no dominant player in the search. Google is the main player in search. It is also the catalyst for many changes in the search. However, it is not yet the dominant player in the way of search McCormick (MKC) is the leading U.S. producer spices.
As for McCormick of the franchise is actually a very good way to evaluate Google. Why do I say McCormick is the dominant player (nationally) in spice, but Google is not yet the dominant player in the search? There are a few reasons.
McCormick has a 45% share of the U.S. retail spice market. His closest competitor has a 12% market share. We may differ about exactly how the web search pie is divided. However, I think we can agree that Google’s market share is less than 45%, and that at least two of its competitors have a market share exceeding 12%. Therefore, Google’s position differs from McCormick in two material respects (already). Google has a small piece of the pie, and the search market is less fragmented than the market for spices.
The market for spices is an upside-down funnel. The few producers are at the top. They feed their products through three distribution channels: retail, manufacturing and restaurants. In each case, the shape of upside-down funnel remains intact, because the expansion happens in the end. The consumer end of the McCormick product does not get to choose among all the spices. Your choice is always indirect. He collected a grocery store, a food product, or a restaurant. Then, you must choose between the spices that particular supermarket decides to take, or who frequents the restaurant opts for the use (and / or make available).
In search of the story a little different. There is still something of an upside-down funnel in the form of search. While it is less pronounced than it was several years ago. Search results are fed through the sites that depend on users visit. However, it is the user who chooses the dependent sites. Some of these sites that rely on account for a large share of all searches. That is very different from the spice market, where no supermarket or restaurant chain represents a large part of all spice consumption – though none comes close. Therefore, the user has a much greater role in choosing his search provider that the consumer has the choice of spices in your spice vendor. While it is true that sometimes looks without knowing Google is the search provider, the situation has nothing to do is in McCormick. By eating a meal that they are not thinking about McCormick. Very often, however, is using a product McCormick. If that is in all the spices used to cook a meal at home, or that manufacture food products, or who ordered the dish at the restaurant, you are a consumer of a product McCormick.
What matters to the extent that the investor is concerned is that the ultimate consumer of McCormick products rarely makes an active, free choice to consume that product over all other competing products (or even many competing products ). The closest it comes to making that choice is in the supermarket, although even there, the decision of how much space allocated to each of the company’s products are made for him. To use Google, the search engine for the first time must make an active, free choice.
Finally, there is the question of infrastructure. This consists of two parts: the production and distribution. McCormick has an existing production infrastructure, which is useful in so far as costs are concerned, but is not particularly valuable. It could be duplicated by a new company with deep pockets. McCormick of the distribution infrastructure is almost impossible to duplicate. It is worth much more than it cost McCormick to create it. McCormick curious as customers (located in the Strait of that inverted funnel) away from the company’s products would not be easy. This distribution infrastructure gives solidity to McCormick spices of the franchise in the U.S. In some cases, but also help McCormick aboard (as some of the company’s customers are expanding globally and is inclined to stick with McCormick in their overseas operations).
Google’s infrastructure production (the algorithm and index) is easy to duplicate and will be even easier to duplicate in the future. There is not much of a barrier to entry here. Currently, Google can provide the best search service in everything, but there is no reason to believe that this will always be the case. The distribution is very often the most valuable part of any franchise (it is usually the part that is most difficult to duplicate).
So the natural question is: in the world of search, if you build it they will come? The best search engine always attract the most users? Probably not. That is good for Google, because they will not always be the best search engine. Google has a great brand. Whatever the value is in Google comes from that mark. That mark is what will keep from users who come to the inevitable new, better search engine.
All revenues from Google are ultimately dependent on the attraction of the searches. Obtain the records requires two things. First, millions of people should do the active, free election to the Google search. Then, those millions of people must continue searching with Google. The brand is the key to step one. The service is the key to step two. Find customers are sticky. However, that probably are not as sticky as we think. It is very easy to take immediate action on the Web (just click on a link). Switching out of Google is not like switching away from Windows.
That leaves the mark. True, when you think the search, think of Google. However, that brand is worth $ 120 million? No – and it is not Google.
Tags: Google, Google search, Market share, Search, Search Engine, U.S, United States, Web search engine
