[hardtke]

AdWords is a natural monopoly, so it is unlikely that someone will ever create a successful competing keyword driven advertising network. In order to generate high prices for the search ads, Google needs to have multiple bidders competing against each other for each keyword. Advertisers will only bid if there is lots of inventory to buy (lots of searches on those keywords). 10% of the search market does not generate 10% of search advertising revenue because of this lack of market participants -- on second tier pay-per-click advertising networks whole swaths of keywords are not competitively bid. The Bing-Yahoo search merger was an attempt to address this problem, but it hasn't worked so far according to the most recent financial reports. Google still generates 50% more revenue per search than Microsoft due to the network effects.

[alphaBetaGamma]

I don’t understand this argument. Why would advertisers only bid if there is enough search volume? For each venue you advertize on you have a fixed cost that is the cost of setting up and maintaining your ad campaign on that platform. So there is an incentive to use high search volume sites, but this hardly qualifying as a natural monopoly.

Or am I missing something?

[prasunsen]

I don't think you are missing anything. There are advertisers who prefer other networks like Chitika, Adbrite, Clicksor etc because of the lower competition/lower click prices there (and not only).

[sek]

Best comment so far, the search monopoly guarantees AdWords. The only way to do this is by breaking search and this is incredibly difficult.

Google is a single pony like Exxon is with oil.