What is Google Up To?

[FLWrite]

Did you notice The Economist is reporting that Travelocity, TripAdvisor, et.al., have formed the Fairsearch consortium to lobby congress in response to Google's purchase of the ITA travel search software platform?

And AA is currently reevaluating its agreement with Orbitz, meaning that AA flights are no longer listed on Orbitz. Southwest never was.

I think the Internet is hostile to two things: middlemen and profits. Does it look like Google is headed for the direct travel search business? I'll bet a dollar...

[charlestudor2005]

Google it and find out.

[WTF]

Originally Posted by FLWrite

I think the Internet is hostile to two things: middlemen and profits. ...

Don't forget Wiki Leaks

[Sisyphus]

Originally Posted by WTF

Don't forget Wiki Leaks

The internet isn't hostile to WikiLeaks...it's the governments it pisses off that can't take a joke...

[pjorourke]

As opposed to SNL which has a sense of humor:

http://www.hulu.com/watch/198282/sat...eaks-cold-open

[Laurentius]

The Internet may well be hostile to middlemen in some respects, but it certainly hasn't been hostile to profits.

I use the Internet either directly or indirectly as a means of selling many products.

The Internet gives me the ability to start even the most frivolous ventures on a shoestring -- and turn them profitable more easily because of the lack of overhead.

True, with ease of searching, the Internet definitely exposes me to wider competition. But that assumes a commodity product -- and I don't really create commodities.

Basically, I have found the Internet to be a boon for profitability of smaller ventures that could never make it as a brick-and-mortar business in a limited geographical area by sheer wideness of exposure.

Of course, almost all of my ideas are niche ideas. That is, they are products or services that would be of great value only to a small number of people. Therefore, those niches aren't profitable enough to attract multinational conglomerates as competition.

In other words, I don't compete really on the basis of price because I find niches where for all practical purposes I am a monopoly; and I'll remain a monopoly because larger enterprises can't do it profitably. Instead, I compete on the basis of providing either information or products that nobody else provides.

And for guys like me, the Internet is a real boon to profitability.

[atlcomedy]

This is a logical extension for Google & an example where you had a middleman that really ceased to serve a unique purpose. When something in the supply chain stops adding value it should go away or at minimum have its share of the pie shrink.

A little history...

Years ago the "travel distribution" companies (Sabre is probably the most well known) were owned by the airlines and for years printed money...one of the few things that were profitable for them. Over time they were all sold as the airlines were hungry for cash. As technology progressed they have continued to have their margins squeezed as what they sold* was pretty much a commodity. Importantly, now the Airlines are their customers, not owners, so they accelerated the margin erosion. At their core all they really are now are giant (& by giant I mean some of the largest in the world) server farms.

*their "product" is the technology that allows airlines (&hotels) to communicate with travel agents, both traditional & online. You go to Expedia, as an example, & type in Dallas to Chicago and some dates & get back all kinds of flights and prices - that is the work of the "travel distribution" company. For that the airline you booked on pays the travel distribution company a couple of bucks. I'm sure even the non-techies (myself included) can imagine how overtime that has become more and more commoditized.

[FLWrite]

Originally Posted by Laurentius

The Internet may well be hostile to middlemen in some respects, but it certainly hasn't been hostile to profits....

Would you not agree however that current consumer technology, which allows me to scan a product bar code and subsequently locate the lowest price on that product within 50 miles of my current location, drives margins toward nill as retailers shave those margins in order to stay competitive? An informed consumer is a powerful thing in a free market.

[pjorourke]

Originally Posted by FLWrite

Would you not agree however that current consumer technology, which allows me to scan a product bar code and subsequently locate the lowest price on that product within 50 miles of my current location, drives margins toward nill as retailers shave those margins in order to stay competitive? An informed consumer is a powerful thing in a free market.

It does for commodities -- products or services that are fungible. For niche products it does the reverse -- vastly expands distribution and minimal additional cost.

[Laurentius]

Originally Posted by FLWrite

Would you not agree however that current consumer technology, which allows me to scan a product bar code and subsequently locate the lowest price on that product within 50 miles of my current location, drives margins toward nill as retailers shave those margins in order to stay competitive? An informed consumer is a powerful thing in a free market.

Agreed and disagreed.

Yes, you are correct that it helps drive prices down; but only to a point.

Retailers also have a competing mechanism in that they often set their prices as high as their higher-priced competitor in order to "not leave money on the table."

For example, in my area Lowes and Home Depot are in competition.

When I go to buy a 2x4x8, the price at one place is literally within 1 penny of the price at the other. And this same thing applies to shingles, nails, etc. Basically, their prices except on products that exist in one store but not the other are identical.

A consumer might assume, looking at this, that both prices are rock-bottom and practically at-cost. But that assumption would be wrong, as anyone who has ever talked to the manager of a gas-station knows.

A great many gas stations have a pricing policy that works like this: they look at what a local competitor is doing, and move their price to the same as the competitor, plus or minus a certain # of cents.

Isn't it mysterious how station A is always exactly 3 cents more expensive than station B?

That pricing is not designed to cut as closely as possible to costs -- and in fact doesn't take costs into effect at all. Instead, it is designed as a form of artificial collusion to keep prices high.

The same will occur when you look to buy anything from guitars to mp3 players. You will find all the retailers look at each other's prices and the lower-priced retailers actually raise their prices in response to what competitors are doing.

So the Internet also allows the gas station example to occur on a grander scale, protecting rather than marginalizing profits.

[atlcomedy]

If we are going to evolve this into a simple discussion on pricing in general, can we at least use call girls as an example and stir the pot a little bit...

Afterall, NPOA is worth.....:

[Laurentius]

Originally Posted by atlcomedy

If we are going to evolve this into a simple discussion on pricing in general, can we at least use call girls as an example and stir the pot a little bit...

Afterall, NPOA is worth.....:

Fair enough!

Just like with the gas stations, I'm sure I'm not the only who has observed that in a given region, a substantial subset of the provider population seemed to increase their price overnight.

Either it is a case of explicit collusion; or it is a case similar to gas stations in which they watch each other and move prices accordingly.

Here is a case where the Internet has not brought about thin margins because any disadvantage it may provide through allowing for shopping around is offset by the advantages of wider audience that increases demand as well as the ability to implicitly or explicitly collude.

[Sa_artman]

Originally Posted by pjorourke

It does for commodities -- products or services that are fungible. For niche products it does the reverse -- vastly expands distribution and minimal additional cost.

Can we get a chart?

[pjorourke]

No chart for you.

[discreetgent]

Hey, WTF and Sa_artman are you no longer best friends?