Competition vital in online marketplace
Traditional retailers are happy to pay a premium for high visibility locations and the same is true online. In the online marketplace, high visibility means featuring prominently in search engine results. Google is by far the most used search engine in the world with more than 85 per cent of global search engine revenue. It’s estimated to be even higher in Australia. The most likely explanation for this remarkable achievement is that most people, including me, think its search engine is the most helpful and easy to use.
The problem is not, however, the functionality of the site but the potential for its growing monopoly power to stifle genuine competition.
There is nothing more destructive than competition. That’s why economists are supposed to like it. And in recent years, the rise and rise of online commerce has left a path of destruction through the business landscape. Photo development labs and bookstores are fast becoming as rare as landlines and BlackBerries. Retailers like Harvey Norman can complain as much as they like about the GST tax-free threshold for online purchases but the reality is consumers have now experienced a much cheaper and more convenient way to shop.
To read Richard's latest Australian Financial Review OpEd, click here