Strive to Dominate
Better to strive to dominate your industry than to complain about Google’s dominant position in search.
I’ve written in the past on how OTAs regularly blame Google as a reason for their underperformance: OTAs and Google and The Selective Scapegoating of Google. In recent months, a few influential German travel start-ups have also publicly stood up against Google’s so-called abusive and dominant practices.
In this post, I raise some questions to understand if complaining companies are practicing what they preach, and drive the point that it would serve us all better to focus more on how we can build a unique product and customer experience so that we don’t have to resort to complaining about Google.
According to a German newspaper report, GetYourGuide, Trivago , Flixbus, Omio and HomeToGo filed an antitrust complaint against Google, accusing it of stealing content and data: “Google is abusing its search dominance by asserting its data standards on advertising partners, extracting their data and using it to promote its own products at a cheaper rate. To achieve this, it forces its partners to sign non-disclosure agreements [NDAs] to access their products and data” (Competition Policy International).
Due to the monopoly Google has in horizontal search, just by having this kind of access, they’re so top of the funnel that they theoretically can go into any vertical. And with the power of their monopoly they can turn on products there without doing any prior investment in it. Anyone else has to work a lot on SEO strategies and these kind of things to slowly go up in the ranking but Google can just snap its fingers and say, basically, tomorrow I want to have a product. — Patrick Andrae, CEO and co-founder of HomeToGo. Source.
It is a tough sell to pretend that the good old days of SEO and the 10 blue links were better for consumers than what they get today. When a business relies on a third party continuing to send them free traffic, that’s a good time to rethink the business model. Google does not have the obligation to be sending free traffic to whoever is able to best crack the SEO code or to showcase businesses who are not unique enough to convince their customers to visit them directly.
As Ben Thomson points out, Amazon could have also blamed Google for trying to favor its own shopping channel results. But instead, Amazon worked at improving its product and customer experience from search to delivery to become the aggregator and the go-to platform for product search. Amazon focused on being better than Google in its industry, not on calling for regulatory help.
More product searches start on Amazon than Google, not because Amazon spent its energy complaining about Google favoring its own shopping results, but because Amazon went out and delivered a better experience for users. — Ben Thompson, Stratechery (Nov 2019)
Back in April, the CEOs of 8 German travel companies (Dreamlines, FlixBus, GetYourGuide, Homelike, HomeToGo, Omio, Tourlane and Trivago), wrote a letter to Google requesting a restructuring (cancelation/reduction/delay) of ad payments linked to search campaigns that ended up generating travel bookings that were subsequently canceled by customers as a result of the Covid crisis. The companies asked Google to “share the burden”.
“We’re absolutely not satisfied with the support Google offered during this ongoing crisis.” Patrick Andrae, HomeToGo’s co-founder and CEO (CNBC)
“Trivago has missed a collaborative spirit from Google.” Axel Hefer, CEO Trivago (CNBC)
Two tweets from Alex Bainbridge and ClickMallorca made me wonder if these companies are asking from Google to abide by a set of business practices and behaviors that they themselves don’t adopt.
Are GetYourGuide, Trivago, HomeToGo and others (which have raised a total of $2.1 billion to date, not including Trivago’s IPO nor its sale to Expedia) extending towards their own advertisers and suppliers the level of generosity and flexibility that they demand from Google?
Do these companies NOT use their dominant positions towards their suppliers to access their products and data to gain better SEO and SEM positioning?
Are these startups acting with the sense of solidarity and collaboration that they demand of Google?
I don’t really have answers to these questions (if you do, I’d love to hear from you), but at least some of their business practices don’t seem to be consistent with the spirit of their letter against Google. Let’s briefly take some examples from GetYourGuide.
If I search for Casa Batlló in Google, the SERP displays a prime positioned window to purchase tickets. The ticket seller is GetYourGuide. GetYourGuide is certainly getting an extremely valuable distribution agreement and visibility in Google. The fact that GetYourGuide is getting consistently such favorable presence above the fold could be argued by some as anti-competitive as these listings tend to favor few providers (GetYourGuide among them).
If we are talking about fairness and solidarity, why isn’t Casa Batlló showing up as the default booking option?
Is it “fair” towards Casa Batlló to have to pay a commission to GetYourGuide for this transaction? After all, I searched for Casa Batlló and would in all likelihood want to book direct if that option had been provided.
Not only GetYourGuide appear in a prime position as the official ticket seller of Casa Batlló, it also appearing both in SEO and in paid search when I search search in Google using the keyword “Casa Batlló”:
Does all this mean that GetYourGuide is using its dominant position in making its partners (such as Casa Batlló) sign agreements to allow GetYourGuide to bid for its brand and access their products and data? From GetYourGuide’s Supplier Terms and Conditions, it makes it clear that suppliers give GetYourGuide a pretty open-ended access to use and license its content as needed.
For online marketing and PPC advertising, suppliers have to agree that GetYourGuide can use the supplier’s name for mail marketing and PPC advertising. But suppliers cannot use the GetYourGuide brand for the same purpose. This could also be interpreted by some as GetYourGuide using its dominant position.
I have heard that GetYourGuide suppliers are having to pay commissions of up to 30% to be distributed in the platform. Quite steep. Is getYourGuide reducing commissions to suppliers as a good faith gesture given the current crisis?
Just to be clear. I am not criticizing GetYourGuide’s or any of the German companies’ business practices. Good for them to occupy as much digital real estate as possible in Google’s results pages. Good for them to close distribution agreements that are aligned with their business and consumer interests. I don’t even have an issue with them charging high commissions. If they’re “too” high, the market and/or other competitors will come in with better or cheaper options. My issue is the knee jerk reaction that many companies have to point their finger at Google and call for government intervention as soon as it is convenient for their business interests. Blaming Google is opportunistic and does not add value to the business. And actually, it seems like the companies that most complain about Google’s dominant position are the ones that have the most dominant positions in Google.
The media and some in the industry have been talking about a Google monopoly in travel since the search company bought ITA in 2010. Since then, Booking Holdings (then called Priceline Group), probably the most Google-dependent competitor in the online travel industry, has gone from a market cap of $9 billion in July 2010 to $78 billion today (in the midst of a worldwide pandemic that has decimated the travel industry). 9X in 10 years. Not bad. Since 2010, billions of dollars in value has been created by online travel companies and billions of VC money has flowed to thousands of travel startups. There has been tremendous innovation in all travel categories. These signals don’t seem to be consistent with a monopolistic environment. They point to plenty of opportunities for companies that have learned to work effectively and profitably with Google, and for companies that have managed to bypass Google in building value.
If a company complains that Google has too much power, it might mean that it’s spending lots of money on Google and/or has ended up overly relying on Google for gaining marketshare and/or is short on innovation. This is on them, not on Google. Others in the travel and mobility industry have succeeded in not depending on Google precisely because they’ve focused their energy in building a unique product and customer experience that consumers go to directly without needing to take a prior stop at Google. And it’s not only the well known companies like Uber, Airbnb and HotelTonight that have succeeded in not depending on Google. It’s also smaller (for the time being) players such as Autoura (AI powered in-destination travel experiences) that are seeking to control their own destiny and using Google opportunistically and not by default.
In today’s digital age where all players are one click away, a company becomes dominant when it builds a product or service that is head and shoulders above its competitors’. Getting to a dominant position is what startups and companies of all sizes should strive for. As Ben Thompson from points out, anticompetitive behavior is often “simply another name for ‘driving differentiation’, which no one should want to be illegal for any company that is not in a dominant position; it is the potential to make outsized profits that drives innovation”
Similarly, companies strive to become a monopoly by building a unique product. In his book Zero to One, Peter Thiel puts it as follows: “All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.”
It would be in the best interest of some travel companies to take a cue on Google’s approach to reaching a dominant position. By never stopping to innovate.
At the end of the day, Google has the dominant position in its value chain largely by providing a better product. Search was better to start, but Google didn’t rest on its laurels: it made search better on mobile in particular with these sorts of modules, and while users could download another app or go to a different URL, they simply don’t want to. — Ben Thompson, Stratechery.
Google earned its way into becoming a dominant platform in search. Amazon earned its way into becoming a dominant platform in retail. 24 years after the launch of the first online travel companies, there is still no dominant multi-product platform in travel. If there is space for a dominant travel platform, and no travel company fills the role, maybe Google or Amazon will take over. But this does not necessarily mean that it would result in less innovation and opportunities, compared to a scenario where a travel industry player would become the dominant platform.
We all should be vigilant of potential monopolies and of Google expanding a natural monopoly in search into neighboring sectors such as travel, where the monopoly may not be natural. But we should also be vigilant of regulation called by competitors against products that have proved to be “too compelling” for customers.
Unlike traditional monopolies, it is hard to argue that Google’s product isn’t getting better. Sure, OTAs need to pay to play on the hotel module, but the hotel module is a genuine improvement over 10 blue links. The same can be said of the other areas where Google gives answers instead of options. I absolutely get the argument that this might be an unfair extension of Google’s search dominance, but the possibility of stifling innovation, both directly and also its incentives, are worth consideration. — Ben Thompson, Stratechery (Nov 2019)
