Firefox-Yahoo Partnership Part 2: What Google Should Have Learned from Netflix

Red PandaFollowing up on our recent post on the new Firefox-Yahoo alliance, we have already seen industry-shaking effects of the new partnership.

Immediately following the release of Firefox 34, Yahoo’s search market share jumped from 9.6% to 29.4%. The roughly 20% that Yahoo gained came at Google’s expense.

The breakdown among the three top search engines now sits at Google-63%, Yahoo-29%, Bing-6%. This is a major shake-up compared to the approximate Google-80%, Bing-10%, Yahoo-10% status quo we had been accustomed to.

This recent turn of events shows that while Google search has been king for several years, its crown was one that was bought and paid for. Google’s dominance has largely been propped up by its default search status on Firefox and on Apple’s Safari browser, which Google paid hundreds of millions of dollars per year to retain.

That business relationship between Google and web browsers worked well for all parties involved for a limited period of time. Firefox and Apple, with no search engines of their own, once had no conflict of interest in selling its default searches to Google. But as Google expanded its family of products by releasing its own Chrome browser and acquiring the Android smartphone operating system, it started to sour the quid-pro-quo relationships it had built with other tech partners as they turned into competitors who had conflicts of interest in selling out to Google. Today, it is Firefox ending its partnership with Google, and in 2015 when the Apple-Google contract is set to expire, Apple could very well make the switch next. We could then see Google’s search market share fall even further (especially since the loss of Apple’s Safari could decimate Google’s currently overwhelming dominance on mobile devices).

Interestingly, Netflix once found itself in a very similar position to Google and made an entirely opposite business decision. The #1 streaming set-top box, Roku, was originally a Netflix creation called Project Griffin. As Netflix was beginning to venture beyond its DVD-by-mail business and into streaming around 2007, there was not yet a good way for users to stream Netflix shows/movies on their TVs. So Netflix developed a new type of streaming box and planned to release it as a Netflix-branded device. But at the eleventh hour, Netflix’s CEO Reed Hastings decided to spin off the project under the independent brand Roku in order to avoid the implication that Netflix was directly competing in the hardware market against Sony, Microsoft, Google, Amazon, Apple, and all other electronics manufacturers who would later produce their own streaming devices.

Today, Netflix can be found pre-installed on every streaming device and the Netflix logo is usually featured prominently on device packages and advertising. Because Netflix avoided directly competing with those hardware companies, mutually beneficial relationships have flourished across the industry: the popularity of Netflix helps electronics companies sell streaming devices, and the ease of use of streaming devices make it easier for Netflix to acquire new customers.

Had Netflix burned those bridges with electronics manufacturers by releasing a Netflix streaming box of their own, competitors’ devices may have touted other streaming services like Amazon Prime Instant Video, Blockbuster On Demand, Google Play, or the late Redbox Instant. And Netflix may not have become the entertainment giant that it is today.

But Google did make the decision to compete with companies that had once been partners, and today it is reaping the effects. While Google will likely remain the widely preferred search engine, the era of Google’s 80% search dominance may be coming to a close.

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