Name any industry and, more likely than not, you will find that the three strongest, most efficient companies control 70 to 90 percent of the market. Examples of this are abundant and include "Big Threes" such as McDonalds, Burger King, Wendy's; General Mills, Kellogg, Post; and Nike, Adidas, Reebok.
Based upon years of research on hundreds of both national and local companies, the authors go on to show that the three market leaders are eventually surrounded by smaller "specialists" who successfully concentrate on niche products (such as high-end audio gear) or niche markets (like fashions for professional women). Sheth and Sisodia describe most markets as resembling a shopping mall with specialty shops anchored by large stores.
Although MSN has been the No. 3 in search for some time, without its own technology and displaying other's search results, it really didn't fit as a true third competitor as the Rule of Three defines it. Wendy's doesn't sell McDonald's burgers, and if it did, it too would not fit the mold.
However, with its new release, MSN is beginning to fit the model. Based upon the latest Nielsen/NetRatings figures, Google holds 44 percent of the U.S. search traffic market share, Yahoo! 18 percent and MSN 11 percent, for a combined total of 73 percent -- again right in line with the market share of other "Big Three" industry leaders.
If the Rule of Three theory holds true in the search industry, the near future will have Google becoming less innovative, despite the largest R&D budget, Microsoft evolving as the innovator, with Google copying Microsoft and Yahoo! following. Google's market share will decrease, with Yahoo! and MSN increasing theirs at Google's expense. True, Microsoft has really never taken the innovation route and as the leader in many categories, it has always been the company copying others' technology, but it is way behind Google in search, and to catch up, it may have to innovate fast with offerings Google finds difficult to replicate.
The Nielsen/NetRating results have 12 other engines currently making up the remaining 27 percent of the U.S. search market. Sheth's and Sisodia's research would suggest that all will fail to move into the top three as generalist engines. The differences with the "Big Three" are just too small for that to happen.
The authors suggest that the No. 4, No. 5, No. 6, etc. will fall into "the ditch" where the lowest returns on assets are earned. These companies lack the benefits of being specialists and the scale of being leaders. More often, they succumb to the "Big Three" unless they can merge their way to the top. Success could come though to vertical market niche engines with exclusive offerings that don't overlap the larger company's business.
The best way to crack the "Big Three" in any industry is technological advancement that can eliminate a market all together, or elevate a new set of "Big Three" companies. This requires big spending on productive R&D, and in search, probably some sort of change of basic human behavior to overcome the Google/Yahoo!/MSN habit.
In most industries, the dominance of the "Big Three" still creates opportunities for new entrants or incumbents with highly focused strategies. This structure, with three generalists and any number of specialists and niche players, offers balance between efficiency and competition.
Working within the search industry, it is easy to get caught up in the rapid changes, new technology, and the long due accolades that it is getting. We forget that search is 10 years old now, and even with all of the current activity, perhaps the market leveling that occurs in all industries in slowly making its way into ours.
Although most of us don't work directly for the "Big Three" or even the engines trailing behind them, past studies like the Rule of Three can teach us much about where the search industry is headed and where to place our efforts to best make use of its potential opportunities. As the French Poet Lamartine wrote in 1860, "History teaches us everything, including the future."