Should Google worry about its low switching cost business model?

by Jens Sorensen on July 29, 2010

In my last post I discussed how Google benefits from the long tail of search with its Adwords platform. Concluding that all seems well in Google land, more and more searches = more and more ads = more profit.

But, what if users switch search engines, unlikely I agree, but it is conceivable. We all make the choice to use Google over the multitude of alternatives and my point is that it’s pretty easy to switch if we wanted to (change your browser setting or bookmark) and this revenue stream would decrease very quickly. So, ignore the reasons why we do stay with Google (good results etc. etc.). And focus on what Google are doing to prevent this happening. It doesn’t take long to realise that the myriad of free products Google brings to market (mentioned above) on a regular basis has something to do with it. Keep us in the Google domain, and if we don’t need to leave, we won’t.

Microsoft’s high switching costs

In contrast, Microsoft makes most of its profit from its operating system and office suite. It’s hard to switch because they go out of their way to make sure interoperability is difficult and therefore you tolerate it because your switching costs are so high. Microsoft knows this, so they don’t worry about usability or bugs. Note their retaliation when Apple started to get their foot in the door. Windows Vista, copying some of Apple OS features; Dashboard etc. but it was still hugely buggy.

So what can Google learn from Microsoft and vice versa? Probably not a lot, both models work – Microsoft are able to command high prices by making switching difficult. Google ensure the constant provision of value added services that do at the end of the day make switching costs high; yes you could leave and go to Bing of Yahoo! but why would you?

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  • Hadeer

    this is really nice & helpful thanks

  • Olin Hyde

    Brilliant assessment of why MSFT does not care about the quality of their code.

  • Anonymous

    @Olin – Thanks for the feedback

  • Jon Anderson

    It is interesting to note that MC Hammer is planning to launch a new search engine, WIREDoo, deep search is an interesting concept. Web users are fickle creatures and with more content being created than ever advances in search technology will become increasingly more important.

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