Real Online Competition: The Right to Exit

There has been a lot of news coverage of Google’s “openness initiatives” over the past few weeks. The “Open Handset Alliance” promises to break the carriers’ appliancization of cell phones. OpenSocial is designed to put its imprint on social-networking generally, while allowing mass participation in creating apps for it:

OpenSocial[] is an appeal to software developers and Web sites to cooperate in adopting a single set of software standards for the little software widgets that can add a social-networking layer to all Web sites. Agreement on a standard would save users from the aggravation of joining multiple networks and save developers from the aggravation of writing code that works only with specific sites. Unlike Facebook’s programming requirements, Google’s use nonproprietary programming languages.

Both these initiatives are great. But somebody has to keep asking the question: what’s in it for Google? Fake Steve Jobs suggests one answer:

[D]espite their big brains and IQ tests, they [got] totally blindsided by Facebook and have to gin up this ridiculous OpenSocial thing. Just like with this phone thing, they round up all the losers in that social networking space to form some . . . alliance. You know how it looks? It looks weak. Companies don’t form alliances and consortia when they’re winning. Also, whenever you see companies start talking about being “open,” it means they’re getting their ass kicked. You think Google will be forming an OpenSearch alliance any time soon, to help also-rans in search get a share of the spoils? Me neither.

Which led me to think–what would an open search alliance look like? Well, the more Google knows about users, the more targeted their ads and services will become. That self-reinforcing advantage helps them on both sides of a two-sided market; they offer advertisers richer data on potential customers, and target ads better to users.

If those advantages tend to lock advertisers and consumers in to using already favored search engines, perhaps an Open Search Alliance would make search data portable–just as an open social networking standard would let you download your profile and social graph into some portable file. As personalized search tailors services to users, your past queries provide a treasure trove of data that can be used to tweak responses to future searches. The basic question is: who ought to control the data that users and search engines mutually generate? All your queries have been training Google to give you what you want–shouldn’t you be able to use that data to your advantage if you switch search engines?

I can just imagine the howls of protest–“Lock-in is the whole Web 2.0 business model! Give ’em stuff for free, use their UGC, and monetize the eyeballs!” But my hope is that (user sunk costs + lock-in) becomes a much less compelling business model over the coming decade. Although optimism on “innovation markets” has largely anesthetized antitrust authorities looking at these situations, we should reconsider whether encouraging big players to compete to capture a market produces more gains and innovation than rules that reduce the cost of exit from dominant players.

If we don’t see those type of rules, just remember that every bit of time you invest in Facebook apps, Google searches, etc. is one more step toward locking yourself in. Expect much noisier ads and much more invasive privacy practices as the companies grow in strength and recognize how difficult it would be for you to quit. And don’t expect that, when you finally reach a breaking point and want to quit, all 100 or so of your friends will follow you over to another social network–or that the new seach engine you choose provides services remotely as good as a Google you’ve trained as well as a voice-recognition program to recognize your idiosyncratic preferences and tastes.