January 2nd, 2007
The "friction-free" economy never existed
After Om Malik dismissed my argument against Google's immanence within the Web marketplace with a non-reference to the "friction-free" meme, I figure I should point out that I did not propose that Google will go away. Rather, because the cost of growth and responding to competitors that specialize in niche search (often that response will be acquisition), Google's unbridled-appearing momentum will be choked off and it will not be able to continue to expand in a way that makes it the environment for all computing business. That doesn't mean Google dies. IBM is still a huge and profitable company, not to mention Microsoft, which is still wildly profitable.
Google, simply put, will not be ascendant for very long because there is so much friction in the market. We should not be too eager to accept a status quo in business as Rich Skrenta suggests. Things areFriction in economies simply moves from place to place based on competition. going to change, that's the way of the world. Being prepared for change instead of hunkering down to defend a leader, like Google or Microsoft, because you've tied your business to theirs, is better business, IMHO.
To drill the point home, let's look briefly to the idea of friction-free economies. This was an idea that was popularized by Ted Lewis, whose 1997 book, The Friction-Free Economy, got a lot of attention because Bill Gates embraced the term. Skrentablog raised the idea as an argument for Google's unassailable market position and I responded saying that the cost of trying and switching to more focused search services that provide better results is also an argument that Google's position is inherently vulnerable.
There has always been friction in economies, it simply moves from place to place based on competition.
My point has to do with the relative cost of picking off Google's higher-value services by being better at search or ad placement in a particular category. Google cannot expect a greater a return on defending itself as an upstart can from winning the customer, since Google will have to find some way to buy the customer back by raising its value over the competitor, who has to deal with fewer challenges because their search is more narrowly focused. In the end, Google's going to start paying a premium for more specialized relationships with its search users.
Om suggests that Google is like heroin, that the more you use it the more you come to depend on it. That, unfortunately, is not an apt analogy, since it assumes a dependency that numbs one to novelty. In a competitive market, novelty constantly offers itself up and people frequently give it a try. In search, if a set of results about a particular topic are better than Google's, Google loses that kind of search in the future, a tiny change but one that adds up to the need to spend more to either improve Google results or coopt the competitor.
The cost of being available as alternative to Google is very low on a per-search basis—but there is some cost. For example, Ted Lewis' book had a Web site, which has been taken down. For the price of a little server space, www.friction-free-economy.com would still be part of the dialog, but it is not. That's friction in action. It is always moving.
Mitch Ratcliffe is a veteran journalist, media executive and entrepreneur. See his full profile and disclosure of his industry affiliations.
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