Deep Economic Moat
A company that has a deep economic moat is Google Inc. According to comScore Inc, a leader in measuring the digital world, Google blew away its U.S. competition with 67.3% of searches conducted in August 2014. Google’s closest U.S. competitors are Microsoft with only 19.4% of the market share followed by Yahoo with 10%. Google has a staggering three times higher market share than Microsoft. According to comScore in December 2012, Google had 114.7 billion searches and its closest worldwide competitor, Baidu, only had 14.5 billion searches. That comes just shy of having 8 times more searches. It owns more market share than all of its competitors combined.
Google is one of the world’s most established brand names. It has become synonymous with conducting an online search; but how has Google made it possible to establish its economic moat?
Second, Google is protected by legal barriers by having a sizable patent portfolio, last year it invested an additional $5.5 billion in new patents. Competitors, such as Microsoft, urged the U.S. Federal Trade Commission (FTC) to take legal action, arguing that Google was in violation of federal antitrust law. However, Google was never charged. Its antitrust defense is that Google is better for consumers and for innovation than their competition or the competitive process.
Third, Google has huge network externalities, everybody knows “Google” and it is always used as a reference for anything you want to search for. Therefore, most companies are joining its network to take advantage of it and be more noticeable by their consumers. Since Google is widely used throughout the world, everyday more features are added and more companies are joining in. Consumers are benefiting from this huge network externality. Due to its economies of scale, its legal barriers and its huge network externalities; Google will continue to keep its strong market position that will make it difficult to beat by any competitor.
Gustin, S. (2012, October 15). U.S. Google Antitrust Probe Spurs Internet-Regulation Debate | TIME.com. Retrieved February 3, 2015, from http://business.time.com/2012/10/15/ftc-antitrust-probe-against-google-sets-up-internet-regulation-clash/
Lella, A. (2014, September 14). ComScore Releases August 2014 U.S. Search Engine Rankings. Retrieved February 2, 2015, from http://www.comscore.com/Insights/Market-Rankings/comScore-Releases-August-2014-US-Search-Engine-Rankings
Sullivan, D. (2013, February 11). Google Still World's Most Popular Search Engine By Far, But Share Of Unique Searchers Dips Slightly. Retrieved February 3, 2015, from http://searchengineland.com/google-worlds-most-popular-search-engine-148089
Economic Moat: A Look Back in Time. David Foulke 10/21/2013 16:57