[Posted on February 25, 2008 - 2:51 PM]
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Google chief economist Hal Varian boils down Google's success in search to the fact that the company has been doing it longer than anyone else. Through practice, Google is better than competitors. He wrote today:Google has been searching the web for nearly 10 years, which is far longer than our major competitors. It's not surprising that we've learned a lot about how to do this well. We're constantly experimenting with new algorithms. Those that offer an improvement get rolled into the production version; the others go back to the drawing board for refinement. So I would argue that Google really does have a better product than the competition -- not because we have more or better ingredients, but because we have better recipes.
Vaarian dismisses more common reasons for market domination such as economies of scale (IBM), lock-in (MySpace) and network effects (eBay) because they either don't apply or aren't that relevant to its particular situation.
'Learning by Doing' can be applicable to startups as well. It reminds me of the explanation given last year for CBS' purchase of Wallstrip. The online business video producers were leaders in producing a daily segment because they were among the few teams around the world that had been doing it on a professional level every business day for the previous few months. This is a less talked about, but great way for a startup without a technology breakthrough to create value.
The danger for Google in relying on the 'Learning by Doing' differentiator is that Google's primary competitor, Microsoft, also learns by doing. It doesn't learn so much by what it does. Instead, it learns by what others do, copies the good parts of that and then beats the first-mover in the marketplace. We've seen it time after time and it is Microsoft's secret sauce.
People might have given up on Microsoft's chances to catch Google's search and online advertising programs because it's taken the software giant longer than expected to make inroads. But, with or without Yahoo, progress is being made now, and it remains to be seen which company's secret sauce will be stronger: the one that learns from itself or the one that learns from others. - Joshua Jaffe
Joshua Jaffe is general manager of TechConfidential.com
