Jul 9, 2007 : Bill Gates, who walked away from full-time work at Microsoft Relevant Products/Services last month, was perhaps the foremost applied economist of the second half of the 20th century.
Gates and Microsoft fundamentally shaped how people think about the behavior of modern markets in which technology plays a central role.
Under Gates, who co-founded the company, Microsoft also challenged the conventional wisdom about competition, business strategy and even antitrust law.
Now, in the early years of the 21st century, Google is the company prompting a rethinking of assumptions.
Microsoft was a master practitioner of "network effects," the straightforward precept in economics that the value of a product or service often goes up as more people use it. There is nothing new about the concept. It was true of railroads, telephones and fax machines, for example.
Microsoft, however, applied the power Relevant Products/Services of network effects more lucratively than any company had done before it.
Microsoft attracted consumers and software developers to use its technology, the software that controls the basic operations of a personal computer. The more that people used Microsoft's operating system (DOS and later Windows), the more that third-party developers built products to run on Windows, which attracted more users.
So Microsoft's success snowballed, and the company owned the essential technology, making it harder for users and developers to switch to alternatives.
But the Internet has changed the rules of networked competition, partly because Internet software standards are more open than those in the PC industry. That helps explain why Microsoft has struggled to catch up with Google in the rich new market for Internet search advertising.
Google's huge, widening lead in that business suggests that while some weapons of competition have changed, the market dynamics are similar, say economists and industry experts. At this stage, they note, Internet search appears to be a market that is winner take most, if not all.
Google, it seems, is the emerging dominant company in the Internet era, much as Microsoft was in the PC era. The study of networked businesses, market competition and antitrust law is being reconsidered in a new context, shaped by Google. Google's explanation for its large share of the Internet search market -- more than 60 percent -- is simply that it is a finely honed learning machine. Its scientists constantly improve the relevance of search results for users and the efficiency of its advertising system for advertisers and publishers.
Source: http://www.toptechnews.com/story.xhtml?story_id=022001PVHS8Q