Why not? Search has a very low barrier to customer switching. If I want to switch to a new search engine that provides better answer than google I only need to change one setting in my browser - it's easier than picking a new desktop color
Once again, you are not the customer, you are the product. Search engine customers (advertisers) gravitate to the largest player because it provides a larger inventory of users/searches to select from. Search advertising is a winner-takes-all market and it would take a huge shift in inventory to change this momentum. Once it starts shifting it is hard to stop and the changing economic factors make it easier for the insurgent to capitalize on whatever mis-steps the incumbent made, but there is a lot of inertia to overcome to get this ball rolling.
A far more likely scenario for a major change in this sector would be for social search to eclipse the crawl it and rank it model that is currently dominant.
Not quite true (well, for most advertisers; I obviously can't speak for you directly). Total return is also important. Especially when you consider that there are non-zero time costs to running advertising on yet another platform.
Would you rather make $ 1 from a $.1 investment or $ 10 k from a $ 2k investment (assuming the former isn't scalable because there are no more users to advertise to)? If there is a non trivial time cost in setting up management, billing etc, you might not even bother with the former.
Yes, in theory. In practice it can be very hard to include switching costs, complexity costs etc into the equation. Most business people I know take a much more pragmatic view of calculating ROI on direct costs and putting a finger in the air about whether it's worthwhile.
Also, if total return is small and capped, it may not even be worth the time to calculate ROI.
Hm, I wonder whether the way to take on Google would-be to remove that setting. Build an engine and offer the phone companies a part of the advertising revenues if they hard-code that engine on their phones.
Problems there would be a) to beat Microsoft and Google at that game, and b) it would turn search into a low-margin commodity. Both make it hare to turn a profit.