Saturday, December 1, 2012

[LINK] The Nature of Internet Monopolies

Faza over at The Cynical Musician has a really interesting post about the nature of online business to tend toward monopolies (Everything, Everywhere, All the Time). You may have heard the phrase "the internet only wants one of everything" recently, and his post explores that concept.

During a recent hearing on the reprehensible IRFA legislation, debate arose about why there's no other online radio service as popular as Pandora. In light of that discussion, here's a bit from Faza on the difficulties of launching a competitive business on the internet in a market dominated by one company (Pandora in this instance, but it just as easily applies to Amazon, Facebook, and Google):

Once we have someone in this position, there’s very little other businesses can do to compete. They can’t sell something that the established power player isn’t selling, ‘coz he is. They can’t go for geographic advantage because there’s no issue of distance on the internet. They cannot hope to sell when the big guy’s closed, ‘coz he’s always open. Their only hope is either to compete on price, which is a race to the bottom (and one could argue that online everyone’s living in silt as it is) or on purchasing experience, which only becomes a factor if they can match the established player’s prices – tricky if you ain’t got the scale to make it up on.

Everything, Everywhere, All the Time at The Cynical Musician