Google’s dominance in search, and therefore in search-based advertising, has been based on offering the best product. That can change, and has done so in the past. Who now trembles at the mention of AltaVista, Lycos or even Yahoo?
Still, regulators must watch Google’s current practices. Even a short-lived monopoly can exploit its customers if it so chooses. Larry Page, Google’s co-founder, has been reported as claiming that the company cannot affect pricing because it sells advertising by auction. That is nonsense. Google could restrict supply, forcing auction prices up.
Yet the bigger risk is that Google parlays fleeting excellence into entrenched power. While it lacks Microsoft’s networked dominance, it has the financial clout to buy out rivals, especially fledgling competitors in online search. Google is also hoping to thrive both in advertising on mobiles and in the growing world of online video. That is a legitimate aim, but regulators must be vigilant. More importantly, Google’s rivals had better start offering a credible alternative.