Internet and Search Engine Industry - Porter's Five Forces

I recently read an article about Yahoo!'s strategy in moving forward after firing its CEO. (See article @ http://www.ft.com/cms/s/2/6ab76552-d96f-11e0-b52f-00144feabdc0.html?ftcamp=rss#axzz1XJDeqY8v). The article discusses a number of Yahoo!'s potential strategies to improve the future outlook of the company. It reminded me of our class discussion on Porter's Five Forces, and I thought it would be very interesting to analyze the internet industry, and even more specifically, the search engine industry. My analysis is contained below:

Barriers to entry - Although my knowledge in regards to search engines may be limited, I know that one of the most critical components to being successful is being known. Microsoft has tried for years to advertise its search engine "Bing" but has been unable to successfully pull internet users from search engines such as Google or Yahoo!. Because of this, the barrier to entry is a positive for existing companies as it is difficult for new entrants to gain market share. In addition, larger search engines such as Yahoo! and Google provide additional services such as email accounts (Google even created its own internet browser) which brings additional traffic to the search engine's website.

Supplier power - This category is another positive of the industry, because a search engine can purchase its computer/networking equipment from many suppliers. In addition, developers are increasing in popularity, and this task can even be outsourced.

Buyer power - Search engines typically provide their services for free, so the buyer power exists only to the extent that additional traffic means advertisers pay the search engine more to advertise.

Substitutes - There aren't really any great substitutes for search engines. Libraries and encyclopedias are about as close as you can get. The article also mentioned that websites such as Facebook are now competing with search engines through online ads. Overall, however, this is a very positive area for this industry.

Rivalry - The competition in this industry is pretty fierce. Yahoo! and Google must constantly work to provide additional products and incentives to internet users to gain market share. This is not one of the strengths of the industry.

Overall, this seems to be a very good industry to be in. It is difficult to gain entry into the industry, but, if successful, one could start a very profitable company by creating a search engine.