Rather than less ads, it also might just mean that there will be competition and where right now Google can charge monopoly prices to advertisers in the future they cannot.
I’m probably dreaming, but a subscription-based search service doesn’t seem entirely impossible. Trying to monetize through ads is bad for the product and is terrain that Google knows much better than Microsoft. Trying to leverage search to drive revenue elsewhere has legal risk.
Ok. Unlike some people on this forum, I’m good at scrolling past stuff I don’t want to engage with.
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If there’s one lesson software can learn from airlines, it’s that when it comes time to actually buy a majority of people will almost always go for the cheap shitty experience over the more expensive even if they say that’s what they won’t do.
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I cant quite get my head around how competition would lower advertising prices.
At the moment. A company will basically pay a price per sale to google. (Although I think theres different models, it all comes down to this as a decision). The advertiser will pay so long as the margin of the product is higher than the advertising price. So google can basically gauge close to the entire margin.
If BingGPT comes in, and 50% of searchers go over. Wouldnt you just have two monopolies? I.e. they will each charge the same, but they will split the revenue between them?
I.e. the price will be set by the value of the sale?
I understand that the price is set by auction, but wouldn’t your bidding behaviour on both platforms be the same?
I think the idea is that BinGPT can just give you the answer without making you go to another website, so who wants to advertise there?
I get why it will reduce revenue for Google. I dont see why competition would reduce overall search revenue
Competition should reduce margins in any industry. If Google can capture 90% of the advertiser’s margin today why would Bing not offer 85% to win that advertising business. The problem today is that Google has almost all the search traffic so there is no competition for advertisers who want that reach. Duopoly is not really as good as a fully competitive market but it is better than monopoly. Like airlines are much better off being able to choose between an Airbus and a Boeing than they would be if it was just Boeing and a bunch of also ran competitors like Bombardier
My quibble would be that Amazon has a lot of search market share among people who want to buy something right now, the valuable kind.
I find Amazon annoying because ads are the top half of a long page and it’s difficult to see while turbo scrolling where the ads end and the product description begins.
So firstly. Let me preface this by the fact that I’m not really arguing a point, I’m seeking to understand something that I dont.
I get the idea at a high level. By how does it work here. Because the product is actually separated into two products. One that serves the searcher, one that serves the advertisers.
So. Starting scenario. Google has 100% market share of search. Charges a price that gets 90% of the margin per unit.
BingGPT takes off. They now have 50% market share of search each. But they each have a monopoly over their 50%.
Google charges 90% margin. Bing charges 85%. Advertisers will advertise on Bing, but they will then only have 50% of the volume. So they will ALSO advertise on google, because they still make their 10%.
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Maybe they don’t advertise on Google and assume that those people can come find them on BingGPT.
People would have a preferred tool but it’s not like users are stuck choosing only one. It would be more like Uber / Lyft where users could look at the other one if they can’t find a convenient car or a good price on their preferred choice.
But people arent going to switch search engine based on who is advertising, surely. Or based on the price of advertising. People will switch based on the quality of the organic search results and the overall ecosystem.
I guess the classical econ 101 is to treat it like two countries.
If you have two monopolies in two different countries. Even if they are selling the same product. They will both charge monopoly pricing.
Google is able to sell ads at a premium due to all the data it collects on users (not just from searches, but also from gmail and your browsing history). So if you split a signification portion of the searches to a competitor, that premium will decrease (not only for it’s search ads, but also for things like gmail ads).
BingGPT won’t be able to charge the same for its ads since it doesn’t have all the other data on users that Google has.
People might switch if they can more easily find the products they want. Searchers are in no way a captive audience in the way iPhone users are
I agree. But that is competing on the quality of the product for the users, not on the price of the advertising for the advertisers. You see my point?
The companies don’t charge a flat rate. They use bidding systems. They reach an equilibrium such that the amount each company that wants to bid on ads on their platform ends up spending with each company is roughly equivalent to their market share, and is about at the same efficiency level (ad spend per revenue or profit on sales from the ad) (this assumes the quality of the ad - i.e. how much revenue it drives - and the users are roughly equivalent on both platforms). Otherwise if it wasn’t the competition level would be greater on one platform than the other per user and would end up being less efficient.
The ad serving companies don’t set the cost of their ads, the companies that want the space to advertise to consumers do.
Yes this is the only difference between Google and Bing for advertisers. If Google can guarantee me a better return by finding the right audience for my ad (for the same spend and same number of people I show it to) because they know more, they get more of my money. Otherwise it’s a zero sum game between the two if they are just showing my ad to similar people at random.
If people want to know how these things work, this is a good place to start: Generalized second-price auction - Wikipedia
That’s my understanding. So pulling on that thread a little.
If the price is set by the revenue per ad. Would the price change if google had 50% market share of search?
I figure they would pay the same price per ad, and end up paying for half as many.
The price wouldn’t really change no, assuming that Google could keep its information advantage on the competition.
I’m not an expert here though, my work goes into my company’s bidding algorithms (and ad/gig marketplace papers are fairly common in my field) so I only have a cursory understanding of all the factors.
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