You can’t establish an online monopoly!
Posted on August 22th, 2007 in Make Money Online) by Lars-Christian |
Tags : business, monopoly
Two of the blogs in my feedreader recently wrote articles about how you should try to achieve a status as a monopoly, as this will in turn lead to greater profits. I first saw an article about it over at Dosh Dosh, and then a spin-off article over at NetBusinessBlog. Anyone who has taken business 101 and seen the price and demand model for a monopolist will know that this is not wrong, mainly because you will have complete market control.
While the idea of a monopoly online is good, it’s practically impossible actually establish one. There are certain fundamental requirements that must be in place for a monopoly to arise, and in my humble opinion it’s nearly impossible to reach these online. The most important factor is obviously complete market control, and this is where most websites will fall off the radar immediately.
There is an infinite number of markets on the internet, and one would think that it should be possible to be the sole supplier in one small, obscure market, but in reality it hardly is. No matter what type of product you supply to your customers, there is a 99,99% chance that somewhere out there on the internet will be able to deliever a perfect substitute, should you for some reason not satisfy your customers. And if there isn’t, you can be quite certain that as soon as you’ve paved the way and started making money, someone will step in and want a piece of the cake.
I shouldn’t even have to mention the case of online publishers. No matter how quick you are with news thanks to great contacts, or how extremely well written your content is, thanks to the nature of the internet and free flow of information, someone will always tap into your marketshare by rewording and republishing your information.
In order to establish a true monopoly, you need to be in control of something that is extremely valuable / expensive, so much in fact that it is impossible for someone else to get a foot in to your market (think railways, telephone landlines and similar, and even then you don’t have any guarantees unless you actively work to stop potential competitors from entering your market), and quite frankly that isn’t possible online. Just look at Google, they arguably have the best, most intelligent search engine algorithms of all the search engines, but yet they are nowhere near a monopoly.
Of course, the fact that you’ll never become a monopoly shouldn’t discourage you from working on improving your market position. The articles I referred to in the start give some great tips on how you can approach this matter, but I just thought it was worth pointing out the inaccuracy in claiming that you will actually be able to create a monopoly for yourself on this glourious thing known as the internet. Of course, if anyone disagrees with my claims, I’ll be happy to hear your arguments!
Inaccuracies? I’ve specifically mentioned that the strategies I’ve listed can ‘improve your market position’ and I didn’t mean to say that they can help you create an online monopoly. Perhaps the use of the word ‘monopolies’ in the sub heading was a cause for confusion.
I actually believe monopolies can exist online but their existence can be extremely short-lived. It is possible to develop an informational monopoly as well, although most of the time it only exists in a coercive form (e.g. gov sites like NASA).
Online ideological monopolies can also be forcibly created through manipulation off-line. (e.g. countries prohibiting access to content of a certain nature.) Near monopolies can also be created through exploitation of limitations in trade or transaction regulations, which only allow citizens of a specific area to use an online tool. Although these sorts of near monopolies may be short-lived as well.
Unique handmade artforms and arranged exclusivity with specific curators or online retailers can lead to monopolistic market positions, particularly when these artforms can only be purchased through a specific portal.
It is possible to establish an online monopoly although as you have said, it can be rather difficult to do so.
Yeah I caught that Maki, but I just felt that you set a tone with the heading, sub-heading and other places in the article could lead a reader to perceive it the way I did, and I wanted to give my $0,02 on the subject.
Government sites like NASA is good example though, one that I failed to take into consideration. And yes, trade regulations can help build the necessary boundaries for a monopoly, but in sophisticated societies such as the modern western world where borders practically only exist on the map, I have a hard time seeing how one would be able to accomplish it.
When it comes to art, sure, but then it comes down to how narrowly you actually define your market, and if you narrow it down to the extreme, you can have a situation of “monopoly”. That doesn’t mean that you can act as a monopolist however, because there’s bound to be other substitute products that your customers will turn to.
“Monopolies and Wealth: What do Bill Gates and Carlos Slim have in common?” is the heading and I don’t see how that is misleading.
And I’ve mentioned in my subheading that you can develop profitable online monopolies, which is something I actually believe. Let’s agree to disagree.
I’m not just writing about the ’sophisticated western world’. I’m taking a bigger perspective here which includes all situations. I don’t think I’ve asserted that I’m only writing for small-time bloggers or businesses in the west.
And I don’t think ‘inaccuracies’ is the right word to use here. We’re all speculating about hypothetical situations whereby monopolies can and might arise. There is nothing ‘inaccurate’ about me claiming that it is possible to develop a profitable online monopoly. But then again, that’s what you are disagreeing with, isn’t it?
There is nothing factual in my blog post and as you can clearly see, I’m using the topic of a monopoly to springboard into general/applicable business management strategies at the end. Perhaps that should be taken into context as well.
Lars-Christian, thanks for joining the conversation. I was using the term “monopoly” very loosely. I should’ve been clearer. I meant market domination rather than monopoly.
An online monopoly is quite impossible because of other factors too: what new product could you sell that no one else has the same product as you? I have not found the answer to the question yet but if anyone has it, well good luck becoming a billionaire.