Question commodities

Read Nicholas Carr’s “Search is a commodity (again)” a few days ago and have been mulling it over since. Carr argues that search is becoming a commodity due to minimal differentiation between search results. Can’t say I agree, because

1. the differentiation between engines still seems quite large,
2. search is indeed becoming branded
3. search is becoming personalized, raising switching costs.

But that’s all been said by others, including Carr. Going beyond that – I don’t think it makes sense to describe search as a commodity because it has no value whatsoever commercially, except as a source of traffic. Ultimately, traffic is what we care about – if search wasn’t so effective at sending folks to a place where they can be monetized, no one would have any commercial interest in it.

So, if we’re asking ‘is search a commodity,’ we should probably be asking ‘is traffic a commodity’? I’m no economist, but due to the widely varying value of a click and the black-box pricing model employed by a lot of sellers, I don’t think it is. A qualified click from someone with intent to buy is worth far more than a click from someone tricked into clicking; different sources of traffic deliver widely varying traffic quality, making ‘traffic’ a highly-differentiated product. Entire business segments – like comparison-shopping engines – exist just to convert low-quality traffic into high-quality, well-qualified traffic. Combine that with lack of transparency – no one can or will tell you how much will it cost to get 100 clicks to your website from Google – and if we can speak of markets at all, they’re product markets rather than a commodity markets.

In general, when a service (rather than a tangible thing, like wheat) is described as a commodity, aggressively question it, because a service can always be improved. Letting your service get described as a commodity – admitting there’s no difference between you and your competitors – is painting a target on your back. Take ad serving, which is commonly described as a commodity but is ripe for dramatic improvement, especially to their last-century front-ends. With so much room for obvious improvement, there’s huge potential to differentiate and excel – that service is only going to be seen as a commodity until someone builds the next generation.