There is an excellent article in this week’s Sunday New York Times: The Default Choice, So Hard to Resist. Thinking about defaults is an important exercise in design. However, the interesting underlying story here is about distribution.
In a Senate hearing last month about Google, Jeremy Stoppelman, the chief executive of Yelp, pointed to that reality in his testimony. “If competition really were just ‘one click away,’ as Google suggests,” he said, “why have they invested so heavily to be the default choice on Web browsers and mobile phones?”
Yelp depends upon Google for distribution. The classic way that a user ends up on Yelp’s site is through a Google search. Either the user ends up at Yelp organically (SEO) or they end up their because Yelp purchased placement (SEM).
The second key point to note is that Google themselves purchase distribution from AOL, Mozilla, and others.
Today, Google pays an estimated $100 million a year to Mozilla, coming from shared ad revenue, to be the default search engine on Mozilla’s popular Firefox Web browser in the United States and other countries. Google has many such arrangements with Web sites.
Google purchases distribution for a dollar and then sells this distribution for more than a dollar. That is essentially Google’s business model.
Google attempted to purchase Yelp and failed. The two parties could not come to an agreement and as a result Google has “gone gangster” on Yelp. Yelp’s review pages were pushed further down the search results page. Google started creating their own Google Places pages. Then Google went and bought Zagat.
This is a classic example of channel conflict.
Google has gone increasingly vertical the last few years. They have released the Chrome web browser in an effort to be less reliant on their search deals with Mozilla and Safari.
But that is only the top part of Google’s sales funnel. In the past, Google pushed everyone through their sales pipe and generated revenue whenever someone clicked an ad. Google is no longer happy being just in this business.
They have chosen to find other sources of revenue. This puts Google in direct conflict with partners like Yelp.
Get Distribution or Die Tryin’
Good products that can’t get in front of users will end up dying. It is important for a business to have multiple sources of customers. Yelp is beholden to Google for customers and Google has decided that they themselves want to keep these customers. Yelp needs to diversify its distribution.
The way to beat a product is not to compete with the product. (I’m looking at you Bing.) The way to beat a product is through disruptive innovation.
For sustaining innovations, incumbents nearly always win.
For disruptive innovations, new entrants nearly always win.
If you ask Siri to make a restaurant reservation for you, it looks this request up using Yelp. This is the type of task that users currently do a Google search for.
I’ve been digging through the private frameworks that come with iOS 5.0. Unfortunately, I haven’t found an API yet to hook into Siri. But I’m going to guess that there eventually will be an API.