In a recent article [Web – An Information Market and its Market Makers], we viewed the web as an information market and analysed its market makers.
Web market makers vary widely from small SEO (search engine optimization) consulting firms up to the Big three of the search industry. The maturity of these different types of web activity, varies substantially.
The search engine market has reached maturity and is yielding major revenue streams to the big players. Consolidation in this market has started years ago with acquisitions by the major players (Yahoo!, Ask.com) and increasing market shares of the few major competitors (Google held more than 42% of the search space, while the big three held more than 80% in the US market, according to Comscore in mid 2006). The search engine market is expected to continue consolidating, though niche players active on certain vertical markets (e.g. real estate), shall continue independently. This is because the search market has many characteristics of a ‘winner-take-all’ market: perceived quality of service (as output in search engine functionality & results) varies substantially leading to loyal users (loyal to one engine (or less frequently few engines)), economies of scale are achieved by capacity building (crawling and indexing the web is a resource intensive operation).
On the other hand, if we would examine the ‘article banks’ market, it is still in its early formation stages. Many new players position themselves as ‘article banks’, a substitute to the web sites developed by established media. Capital expenditure needed, is limited. However, quality of content varies substantially, since some operate with limited quality control and ability to attract quality content. The market players which shall be able to attract quality authors and offer quality content shall be profitable. The others shall hardly survive, therefore the market shall be reshaped, to consist of a few big and resourceful players.
Moreover, the web hosting market is experiencing fierce competition. In this activity bigger and smaller players are active. Unlike the above mentioned activities, web hosting shall become a commodity service with standardized offerings. Therefore smaller players shall be in a disadvantage, since they won’t be able to achieve economies of scale. Therefore, consolidation is expected also in this market.
The effects of consolidation, to the web and its users, remain to be seen.
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