This question was inspired by an article on Habr and the subsequent comments. The gist is: there is Yandex — they have a search engine. In the search engine, they promote their other products, thereby limiting competition. How correct is this? In the article and comments themselves, there are quite a few arguments IN FAVOR of antitrust legislation. What do you think?

анонимный вопрос

In connection with this question, I would like to recommend Vyacheslav Kostrov’s lecture “Platform Economy and the Hayekian Market Process,” delivered by him at the “Capitalism and Freedom” conference in 2019.

The lecture is very rambling and contains no conclusions, but it places the question you are asking into a broader frame — it considers not a specific case of using a dominant market position, but the principles of the functioning of the platform economy as such.

Let’s consider a platform such as a search engine. By design, it is a service that searches the web for mentions of information that interests the user, based on certain input data provided by the user. After attracting a sufficiently large number of users with the convenience of the service and the quality of the search, the owner of the search engine may raise the question of monetizing the platform.

The most direct way to monetize a service in its original form is through customer donations. This method is implemented by Wikipedia, and it allows it to focus its efforts on the completeness of content and the neatness of its presentation, that is, on improving exactly those consumer qualities of the supplied product for which the user came to the platform. Of course, Wikipedia is not a search engine in the pure sense, but theoretically, nothing prevents the use of the same model for classic search engines. My channel practices this method of monetization.

A search engine could also sell analytics on user search queries to interested clients. This is also a fairly “herbivorous” way to make money and, as in the case of Wiki, is unlikely to bring in mega-bucks. My channel also practices this method of monetization in a sense — these are answers to questions with attached donations and commissioned articles.

Next come the methods of earning money whose application degrades the product itself.

First, there is advertising. In addition to providing the user with what they are searching for, the search engine slips into the results something that the advertiser would like them to be introduced to. Thus, for the user, the product becomes worse due to the lower relevance of the results, but the platform owner gets a profit. I no longer practice this method, and if a request to sell advertising on the channel appears, I try to switch the requester to one of the monetization methods mentioned above.

And finally, the owners of the search engine may start earning not only from others’ advertising, but also lure the user to their own subsidiary services that have no direct relation to the search engine. This is exactly what we see in the article under discussion. As a result of such a policy, search results become even less relevant for the user, and they start looking toward DuckDuckGo, but before the user has completely fled the search engine, the subsidiary platforms, thanks to the inertia of human thinking, will manage to build their own customer base. I do not practice this either, but I can well imagine a blogger periodically advertising some own business on their channel.

As a result of the development of such a mega-platform, after some time it turns out that some businesses under the general brand are more profitable, others less, and some are completely loss-making. However, making decisions about optimizing the asset structure is quite difficult because they influence each other. The platform flounders, making increasingly less balanced decisions, until it finally goes belly up. Just relatively recently, one such behemoth of the platform economy went bankrupt — Cook’s outfit, which existed for over a century and a half. It was the first to implement the package principle for organizing tourist trips, thanks to which it quickly became a global hegemon in the tourism industry, and it ultimately burned out on exactly that: too many of its assets, instead of reacting to market stimuli, were engaged in serving other subsidiary companies of the holding. Its own airlines, its own hotels, its own tour operators — it would seem, here is a monopoly, just collect the rent — but no, it failed to keep up with progress and lost to a conditional Booking.com, a next-generation platform business.

Exactly the same fate will befall Yandex, without any antitrust authorities.