EU Commissioner for Competition Margrethe Vestager made a big splash this week. She announced a formal anti- trust probe into Google. The focus of the probe is the prominence of Google Shopping in search results. Google Shopping if you didn’t know - and I certainly didn’t - is a promoted advertising service. It pops up when you use internet search to try to find goods to buy online. Google makes money by taking a cut from the companies advertising. In Europe 90% of online searches are on Google . So Ms Vestager and her Directorate believe this is an abuse of market power.
I have no doubt Google makes plenty of money out of this service. On the face of it they also have tremendous market power. It is not hard to see how the Danish politician makes her case. The case will no doubt drag on for many years. It opens up some bigger questions. Questions about Europe and Google that are worth looking at.
For example, why is Google so dominant in search in Europe anyway? 90% is a lot higher than 67.5% in the US. The latter figures comes from Comscore. I could not easily find an independent source for the former. More of that below.
There is also a serious question about whether this is a genuine market. The reason I didn’t know about Google Shopping is that I would never think of a search engine for shopping. I just go to Amazon and find the best price. Amazon of course promotes its own products wherever possible. As a consumer this doesn’t bother me. I asked a couple of other people and the answer was either Amazon or eBay. If I lived in China then I would use Alibaba. Search is not the key driver of shopping.
A distraction for Europe
You won’t have to look far for concerns about the motives behind the probe. The most important question in this context is why the distraction? Europe has a terrible track record at the top end of the technology industry. True we dominated mobile for about 15 years before the iPhone arrived. Past glories were also in the news this week. Nokia is taking over Alcatel-Lucent. SAP also has a proud record in enterprise software. That is about it for Europe leading the digital world.
The chance for change
Today we are creating the conditions to change that. London and Berlin are two of the biggest and best startup locations in the world. Deep capital markets back startups in these locations. Elsewhere smaller startup communities are numerous and vibrant. Trondheim for example may have more startups per capita than anywhere else. I know from my small business consulting experience that Scotland is home to some great companies.
Politicians and regulators should be concentrating on enabling the growth of these communities. In late March a different branch of the EU announced its priority. The creation of a Digital Single Market. There is even a Commission Vice President responsible. Andrus Ansip from another Baltic state, Estonia. I am not sure if these proposals are workable or reach deep enough. I am confident this is the direction politicians should be taking.
Be serious Startup Britain
If there is one lesson from this it is that we in the startup community need to do it ourselves. Yet another stray data point this week was this survey from Silicon Valley Bank. It tells us UK entrepreneurs top wishes from whoever wins the UK General Election. More tax incentives and better access to capital. Seriously guys? We have the best regime of tax incentives anywhere in the world. Agencies like Scottish Enterprise boost capital input as well.
I am a serious political geek and even I am bored out of my skull by this campaign. The result may be exciting but the process is not. If you have a startup don’t waste your time. Focus on the product and the market and ignore the noise.
Help me gather SaaS revenue model data
As it turns out this column has been almost a complete distraction. I will get back my focus on the SaaS revenue model for SMEs next week. Feeling better for a bit of a rant anyway!
Despite the above, I have not spent the entire week reading news articles. I have been trying to build up some information on the SaaS market in Scotland. This is not as easy as it sounds. In part this reflects a dearth of information on non US startup and tech markets. Hat tip to Tech.Eu and Arctic Startup for their consistent efforts to remedy the problem.
SaaS specific material is even more of a challenge. This is the most important startup financial model. But it is tough to isolate SaaS focused data. See my quick guide to SaaS reading and check out Tom Tunguz for US public company SaaS data. That is about it.
I am digging into the data for Scotland. There is a big risk that my efforts will be rubbish so I could use your help. If you are part of a SaaS business in Scotland or know of one (or more) please fill in the attached survey. It is dead simple and real quick. I will then triangulate with my own sources. Thanks for bearing with me.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.