Is Google A Monopoly? The US economy thrives on competition. It’s designed to get consumers the highest-quality products and services at the lowest possible price by pushing businesses to battle each other for market share. Since most companies are focused on growth, this system is generally adequate.
The best way for any business to fend off competition is to create a wide moat – that is, one or more competitive advantages that make it difficult for peers to persuade customers to switch products or service providers. In some cases, that means keeping prices lower than average. In other cases, it means drawing consumers into a web of products and services that would be costly or inconvenient to replace.
As companies grow, they tend to be more successful in building insurmountable moats. For example, Walmart’s large size allows it to buy merchandise in bulk at lower-than-average prices, and most of the savings are passed on to consumers. It’s nearly impossible for other retailers to compete against Walmart on price.
Apple has mastered the technique of making switching costs unappealing. Its customers tend to stick with Apple for life. Certainly, that is partly due to Apple’s reputation for high-quality products and services. Still, Apple would likely lose market share to lower-priced competitors if not for its complex ecosystem.
All of Apple’s products, including smartphones, tablets, wearables, smart home devices, and so forth, are fully integrated with services like Apple Music, Apple TV, and Apple Fitness. Choosing another type of smartphone would necessitate replacing or losing a long list of additional products and services.
Google, which rolls up to parent company Alphabet, has a moat that is virtually unassailable. It started with superior search technology capable of returning faster, more accurate search results. That attracted users, which in turn attracted advertisers who paid for the privilege of exposure on the Google platform.
As Google brought in vast amounts of revenue from its digital advertising service, it was able to stay a step ahead of its competitors from a technology, innovation, and hardware perspective. The company could also afford to hire the world’s most talented employees, ensuring a never-ending cycle of innovation and technological advances.
Google’s ability to grow and capture market share unchecked has regulations in many countries concerned. Is Google a monopoly? If so, what could that mean for shareholders?
Google Search Market Share
When it comes to search engine market share, there is no doubt that Google is the market leader. Internet users turn to Google for their online searches more than 90 percent of the time, which leaves very little business for the other providers in the top five list.
Bing, a Microsoft platform, is in second place with just over three percent of the global search market, and Yahoo is in third place with 1.3 percent.
The Russian platform Yandex has 1.04 percent of the global market, and China’s Baidu rounds out the top five with a market share of 0.8 percent. Combined, these four control less than seven percent of the global search market.
Google Ad Market Share
Google’s dominant position in the global search market makes it the platform of choice for advertising. Advertisers’ primary goal is to put their products and services in front of consumers, and for that, they must go where consumers are. If nine out of ten online searches take place on Google, that’s where advertisers want to be.
The digital marketing space is more competitive than the search market because internet users spend time online doing all sorts of things. Social media attracts digital advertising dollars, along with streaming services, gaming sites, and e-commerce platforms.
In 2021, Google received roughly 28 percent of the digital advertising revenue from US businesses. Meta’s Facebook and Instagram sites were in a solid second place with just under 24 percent of the US digital advertising revenue. Amazon followed in third place with a little more than 11 percent.
From a global perspective, Google and Facebook are still in the number one and number two positions. In 2021, Google had almost 29 percent of the world’s digital advertising market, and Facebook owned 23.7 percent. Amazon still made it into the top five but didn’t crack the top three for global digital advertising. Chinese tech firm Alibaba got the third place position with almost nine percent of the market.
Is Google Ads a Monopoly?
Facebook and Amazon are anxious to pull advertising revenue away from Google, and they are making slow progress.
Each is expected to increase its market share by one percent in 2022, and they may get another one percent of the US market apiece in 2023. If they succeed, most of that revenue will come from Google’s market share.
It is safe to say that Google Ads is not a monopoly. It has a small number of competitors who are capable of overcoming Google’s digital marketing moat to capture a portion of its market share.
However, given Google’s size, competition is strictly limited to other large organizations, which does put Google at risk for attention from regulators.
Is Google a Perfect Monopoly?
Competition is key to protecting consumers. Companies with complete ownership of a particular market can operate with impunity, charging unreasonable prices and/or producing low-quality goods and services without losing customers.
Preventing monopolies and protecting consumers is a priority in most developed economies. The largest companies regularly run the risk of violating laws that prohibit monopolies. The tech industry has been in the global spotlight for some time due to the massive size of businesses like Apple, Amazon, and Meta (Facebook).
In the United States, laws limiting monopolies are referred to as “antitrust” because they were initially enacted to close a loophole that allowed trusts to own an entire industry.
At the time, some companies created trusts to hold the entire US railroad system or all of the coal mines in the country. Antitrust laws ensured that those trusts were dissolved to promote healthy competition.
From a legal perspective, Google isn’t a perfect monopoly in any of its business units. There are competitors for everything from web browsers and smartphones to digital advertising platforms.
However, Google’s hold on search engine traffic is uncomfortably close to a monopoly, and that has regulators around the world – particularly in Europe, Australia, and the United States – quite concerned.
The New Google Antitrust Lawsuit: Is Google Ads a Monopoly?
Google’s general response to allegations of monopolistic behavior comes down to the fact that the search engine is completely free for users. More importantly, it isn’t an essential service that meets basic human needs like utilities, housing, and food. Nonetheless, Google has been named in antitrust lawsuits in several countries.
The US Department of Justice filed a suit against Google in 2020, alleging its control of the online search market violated antitrust regulations.
Ultimately, Google prevailed, as it was able to show it achieved market dominance fairly. However, a new case alleges that Google’s digital advertising business violates antitrust rules. Among other claims, the Department of Justice says Google employs deceptive practices around its use of consumer data.
Is Google a Monopoly or Oligopoly?
The bottom line is that Google isn’t a monopoly, though there is some debate when it comes to whether Google uses monopolistic behaviors to gain an unfair advantage. The current antitrust lawsuit may offer clarity on that point. It would be more appropriate to say that Google is part of an oligopoly – that is, one of a few companies that produce similar products and control what amounts to the entire market.
Google’s parent company, Alphabet, was created, in part, to prevent any real or perceived suggestions that Google has an unfair advantage. Each of the business segments that roll up to Alphabet operate independently, which Alphabet says is enough to ensure fair competition.
If Google is unsuccessful in fending off the latest legal threat, it is unclear what will happen next. Regulators haven’t specified how they want to remedy the antitrust violations, should they be proven, but one possibility is requiring the company to break up into smaller independent businesses.
Such a scenario is a long way off, so it’s not something for investors to be concerned with right now. The best strategy is to follow the case, which is being thoroughly analyzed and reported on by industry experts, and then determine whether and how the outcome will impact Alphabet’s long-term growth.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.