20/7/2018

Create a desert of profitability around you

ucaetano on Hacker News:

I once had a strategy professor define the Google business model somewhat like that, where Google tries to make every other business around it free or irrelevant”. It results in a few different effects:

By reducing the cost of other links of the value chain, there is more money available to spend on the links you actually generate revenue on. This shifts profits along the value chain to that link. One example is dramatically reducing the cost of phones and internet access, thus allowing customers to spend more time and money online, which generates revenue and profits for Google

By making the other links free or irrelevant, you reduce the odds that a competitor in those links will strengthen their position and will extract more profits from the rest of the value chain. One example is using Android to prevent a monopoly on the smartphone side

If Apple had a monopoly or near monopoly, it would be able to extract larger economic profits from the other links on the value chain, including Google

A desert of profitability shifts consumers to you, and keeps competitors away.


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