Theory of Competition

By Reuters  |  Posted 06-12-2008 Print Email

Theory of Competition

Speaking to reporters following the interview with Auletta, Schmidt challenged the notion that Google dominated the Web.

He said that while Google may dominate the market for text-search advertising against weaker cross-town rival Yahoo, Yahoo is the leader in the hot online display ad market, preferred by corporate marketers for brand marketing. He noted it is a larger market than text-based search ads.

Schmidt declined to comment on whether talks had cooled with Yahoo on an ad partnership deal that would pose an alternative to talks between Microsoft and Yahoo on various potential partnership deals, including ads.

He argued mature industrial markets allow big players both to compete and cooperate, citing IBM as a model. With an antitrust decree hovering over its head for decades, IBM evolved a strategy of becoming a components supplier that enabled many other high-tech companies to thrive.

Schmidt contrasted this style of open competition to what amounts to a winner-take-all strategy by Microsoft to dominate the Windows software market and related business software.

"The Microsoft model, where it is the only competition, is not, in fact, the model in mature industrial structures," Schmidt said. "The mature industrial structure is that 'piece parts' are built by people in reasonably fair and open ways."

"You have to resolve in your mind the fact that there is competition and collaboration in mature industries."

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