By spreading into multiple related data-driven business sectors, the dominant data platforms reinforce market power in their core businesses. Expansion into new sectors adds to their overall storehouse of user data, while choking off other sources of data for potential competitors.
Google has been the most aggressive player in this, expanding from its core search advertising business into almost every imaginable space where users operate online (and increasingly offline), from watching videos, to emailing friends, to buying products, to using their cell phones, to updating their calendars. Google’s reach into all these activities allows it to develop an integrated profile of more individuals with greater breadth and depth than any potential rival.
The promotion of free products online becomes what analyst Bill Gurley calls the creation of “moats” around Google’s “economic castle:” online search advertising. Gurley argues:
Android, as well as Chrome and Chrome OS for that matter, are not “products” in the classic business sense. They have no plan to become their own “economic castles.” Rather they are very expensive and very aggressive “moats,” funded by the height and magnitude of Google’s castle… Google is also scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it.[i]
Moving into these new online sectors is therefore less to create new revenue-generating ventures than to scoop up new data and, as importantly, prevent potential rivals from gaining a critical mass of user data where they might challenge where a company is dominant, as with Google in search advertising. This is analogous to how the U.S. Court of Appeals in 2001 described Microsoft’s actions where that company’s expansion into web browsers and other so-called online “middleware” products was less about dominating those Internet sectors than “to meet the threat to Microsoft’s monopoly in another market (operating systems).”[ii]