(A simple way to explain the idea [that modern marketplaces get their power from aggregating demand] is through Brussels sprouts. Given a choice, would you rather own the world’s supply of Brussel sprouts, or its demand? I say you should pick the latter. Owning all the supply would allow you to dictate your own prices, which is nice; but it would also require owning all the land on which Brussels sprouts can grow. That would be absurdly expensive and a nightmare to operate efficiently, on top of being quite a precarious position. How do you know you haven’t forgotten one piece of land somewhere? Or stay ahead of innovations like indoor farming? Controlling all the demand for Brussel sprouts, on the other hand, gives you the same pricing power, without the need to own and operate all that land.)

Closing,

Goldman Sachs analyst Rod Hall reckons Google will pay $9B to Apple this year to remain iOS’ default search engine — an amount that could go up to $12B next year (source). By comparison, Microsoft’s search engine Bing generated $1.7B in revenue in 2017. So Apple’s “search engine business” is roughly 5x as big as Microsoft’s — all while, you know, having no actual search engine.

Post a response on your own site? Send me a webmention!


Content: CC BY-SA 4.0