Understanding Google
Content monetization is the downstream industry, and access is the upstream industry. Google doesn’t have to take over the upstream industry to increase its profits; it just has to destroy their toll booth. By disrupting complementary industries and making them more competitive, Google is increasing their profits in their downstream industry.
A lot of Google’s projects make sense when viewed from this angle. Google Docs is an attempt to reduce the Microsoft tax. Android is an attempt to reduce the Apple tax. Google’s participation in the spectrum auction a couple years ago (and lobbying of the FCC to require open access) was an attempt to reduce phone carrier market power. Google Voice is the next iteration of that attempt. Ditto for selling phones without contracts. Google Buzz is an attempt to disrupt Facebook’s market power. Google’s recent plans to build a fiber network is an attempt to go after local ISP monopolies.
The point is that Google doesn’t have to dominate any of these industries to be successful, provided that they dominate content monetization. They merely have to make these industries more competitive, lowering the barriers to consuming a lot of content online.
I’m currently reading the book, What Would Google Do?, and getting a lot out from it. One of the questions we often ask about companies’ intentions, like Google’s, is “why give out so much cool stuff for free?” This is a well-written article on double marginalization and how sometimes you need to stir the pot to create results.
