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Another way that I like to express that is "create a desert of profitability around you". I once had a strategy professor define the Google business model some

Another way that I like to express that is "create a desert of profitability around you". 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.

sah2ed 8y ago
FWIW, the expression "create a desert of profitability around you" is more popularly expressed as "create an economic moat".
- Symmetry 8y ago
  The ideas are more different than the analogies are. A moat would be things like patents, data, expertise, etc that a competitor would need to get to match you and which are hard to develop. That doesn't have anything to do with the profitability of nearby market niches.
  - ucaetano 8y ago
    Exactly! A moat is less efficient than a desert. A moat is highly susceptible to niche entrants who might expand into your main market after, but a desert leaves no to little money on the table for anyone else.
    - sah2ed 8y ago
      You are correct, if you believe competition in the marketplace (or the battlefield) is linear -- where enemies/competitors lunge at you in turns, one at a time. If you do not believe that competition is linear, then it cannot be true by any stretch of the imagination that a moat is "less efficient" than a desert. A moat/desert/<insert metaphor> is only one of many tactics employed to win battles. IOW, it is not a strategy as you seem to be implying with this reply.
      - ucaetano 8y ago
        > it cannot be true by any stretch of the imagination that a moat is "less efficient" than a desert Nope, a moat protects a profit center by creating barriers to entry in the form of competitive advantages. A desert kills profit centers that could be used to attack your own profit center. Competitors can't leverage neighbor markets as an entry point, they can only attack your core business directly. You can have both, but a desert end up being more efficient for the simple fact that it reduces the total amount of profit to be had in the market, draining competitors of resources. The desert of profitability is the Russian winter of business models (with all the "Russian winter" caveats, so let's not go down the route of discussing if it was actually the winter or German lack of fuel, or Napoleon's whatever): you don't need strong moats when enemies die before reaching your walls.
        sah2ed 8y ago
        > A desert kills profit centers that could be used to attack your own profit center. Competitors can't leverage neighbor markets as an entry point, they can only attack your core business directly. Great! You are essentially proving my point that they are tactics that can only be effective in tandem. A desert of profitability tactic is only feasible if you are already awash in profits. In other words, a moat must necessarily exist to justify the expense of sabotaging your competitors' defenses, otherwise, if they prove to be resilient (Intel+AGP vs PCI) or launch a surprise counterattack, you are toast.
        8y ago
  - sah2ed 8y ago
    The problem with this argument is that it is a gross simplification of reality. Terms like "market", "nearby market", "niche" etc are all abstractions the same way a map is an abstraction of an actual territory. They help us reason clearly but they should not be used as a substitute for the real thing ala "the map is not the territory". A "desert of profitability" is essentially a battle tactic -- a tactic where you delay the use of your moat (fortress, trench etc) by igniting trouble elsewhere, usually in neighboring lands that enemies must traverse before the war reaches your own land. IOW, it is a tactic used in conjunction with other tactics, it is not a strategy; all it does is buy you time. Eventually, the technology landscape will shift and such economic moats, no matter how deep, will lose their relevance.
- nostromo 8y ago
  Those aren't equivalent concepts. A moat can refer to any number of strategies to protect your business from competition.
jacquesm 8y ago
> 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 In the case of Apple vs Android I'd say Apple is doing pretty good and are arguably doing substantially better than Google in spite of not having followed this strategy themselves.
- ucaetano 8y ago
  > In the case of Apple vs Android I'd say Apple is doing pretty good and are arguably doing substantially better than Google in spite of not having followed this strategy themselves. They follow a different strategy: vertically-integrated walled garden.
- TrainedMonkey 8y ago
  Apple is not making money from links.
- dasil003 8y ago
  The strategies are orthogonal. Google's interest is not in making money from smartphones, it's in preventing Apple from having a monopoly wherein they can charge Google unlimited amounts for access to mobile users.
  - scarface74 8y ago
    But Google still pays Apple $3 billion a year.... https://www.cnbc.com/2017/08/14/google-paying-apple-3-billion-to-remain-default-search--bernstein.html https://www.cnbc.com/2017/08/14/google-paying-apple-3-billio...
    - dasil003 8y ago
      Exactly. Can you imagine how much it would be if Apple had a monopoly on smartphones?
      - 8y ago
AnimalMuppet 8y ago
I think that Google was more worried about Microsoft dominating smartphones, not Apple. Microsoft would be tempted to use smartphone dominance to steer search traffic to Bing rather than Google.
- ucaetano 8y ago
  > I think that Google was more worried about Microsoft dominating smartphones, not Apple. Maybe initially, before the iPhone. But the iPhone was the Dreadnaught of phones: everything that came before it became instantly irrelevant (look for HMS Dreadnaught). > Microsoft would be tempted to use smartphone dominance to steer search traffic to Bing rather than Google. Just as Apple would as well, unless Google pays, which it does.
  - sbhn 8y ago
    Google also use to pay Mozilla Firefox millions. I don’t know if it still does.
rayiner 8y ago
See also Google’s efforts to commoditize content: https://en.m.wikipedia.org/wiki/Viacom_International_Inc._v._YouTube,_Inc https://en.m.wikipedia.org/wiki/Viacom_International_Inc._v.....
- rushabh 8y ago
  It’s not as simple as that. Google did not go out to commoditize content. Technology created a new distribution system that allowed them to dominate the distribution of content. If you read the case, many of the videos Viacom was asking Google to take down, were uploaded by Viacom themselves. So everyone was scrambling to get more eyeballs, that ultimately led to commoditization. Also referring to the parent post, “desert” is not the right analogy when you create surplus around you to keep out competition. I think the knowledge industry is more like a religion, where the information is free but there are still strong structures that support it. In case of religion, these structures are supported by supportive communal relationships. In technology, by massive network effects.
suyash 8y ago
Exactly, most people don't realize this simple strategy and worship at the altar of Google for giving "free" software. e.g Chrome is free and google wants to push for web technologies only because their cash cow (Web Advertising) can keep generating profits as long as there are more web users specially the ones whose behavior can be easily tracked on their browser.
- ucaetano 8y ago
  > Exactly, most people don't realize this simple strategy and worship at the altar of Google for giving "free" software. Yeah, people should stop idealizing and worshiping companies. Apple is only pursuing "privacy" because it tried and failed miserably at user monetization, but it won't think twice about handing over all your data to the government (like they did in China) if that's the best business options. They're all companies, they're here to make a profit. That's one reason why I find it easier to trust companies than to trust governments. I know exactly what companies want, so I can predict how they'll act. Companies are that "friend" who will always get money from your wallet, whenever they have a chance. Governments are those friends who swear they are on your side and want to help and protect you, but will sneak their fingers into your wallet whenever you're not looking.
  - sbhn 8y ago
    Governments are in the business of creating monopolies.
  - baxtr 8y ago
    I think it’s more nuanced than that. Culture and values do matter in some companies, and, they are used in daily interactions. This will yield different results. Apple is no saint, but much more aligned with my values than google for example.
HillaryBriss 8y ago
> One example is using Android to prevent a monopoly on the smartphone side. yeah, good point. i think it helps us understand the Android ecosystem, its SDK, its user base, etc. it doesn't seem like Google, a search and advertising company, had a natural reason to enter the mobile phone OS market. and they didn't set out to create an "insanely great" mobile OS experience, either for the users or for the developers. instead, the strategy was apparently to just shoehorn a camera OS into the mobile phone market, offer it for free, grab as many users as possible, and thereby disrupt/restrain Apple. and it has worked quite well for Google. but Android has subjected users and developers to a pretty bumpy ride. a lot of people went along for that ride because the upfront costs appeared to be lower than Apple/iOS. i don't know about the longer term costs though.
- ucaetano 8y ago
  Yep, one strategy analysis that I (sadly) rarely see being done is evaluating the value chain. Essentially, you look at all the links on a value chain and look at how competitive each one of those markets are. The links with the least competition will capture most of the excess profits in the chain, and the links with the most competition tend to be commoditized and have zero economic profits (which are different from financial profits). Taking Google's online ads value chain, for example: Chipset & component makers > device makers > OS makers > browser makers > ISP/carriers > online platforms > content creators > advertisers > ad platform > users (You could rearrange this in a few different, but still valid, ways) What would happen if there was a single device maker? Or a single OS maker? Those would be able to yield monopoly pricing, capturing most of the profits in the value chain. Now look at those links: in how many of them Google operates now in a strong way? - Device makers (Pixel) - OS makers (Android, ChromeOS) - Browser makers (Chrome) - ISP/carriers (Fi, Fiber) - Online platforms (YT, Blogger, G+, sites, etc.) - Content creators (indirectly, sponsoring) - Ad platform (Adsense & Doubleclick) Now look at where it makes money: - Ad platform (Adsense & Doubleclick) All those other businesses exist to protect the revenue-generating business.
  - HillaryBriss 8y ago
    nice. one of those links i personally find interesting is "content creators." on the top end, it appears that a handful of the apps in the Google Play Store make the lion's share of the revenue (e.g. Facebook, Google itself, and some really strong game companies). at the same time, i've heard estimates that 50% of the independent app creators earn less than $500 per month. and it's getting worse. in short, the android app market was quickly populated by a huge number of independent app creators (who presumably thought it would be a good, durable, new line of business). but, for the most part, these app creators became a low-income-neighborhood/swamp around the top app creators. but Google still (indirectly) benefits from this arrangement because it offers the appearance of a free, open, lucrative, land of opportunity -- a healthy marketplace.
stcredzero 8y ago
- 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. By this logic, the biggest force in the universe preventing micropayments by tying media to the tawdry, corrupting mechanism of advertising, is Google. A desert of profitability shifts consumers to you, and keeps competitors away. Cities are supposed to impoverish the regions directly around them in this way, as well.
- ucaetano 8y ago
  > By this logic, the biggest force in the universe preventing micropayments by linking media to the tawdry, corrupting mechanism of advertising, is Google. No, it is users being willing to pay. The vast majority of users are far more ok with being shown ads than paying the equivalent of the cost of the ad to have it go away.
  - stcredzero 8y ago
    The vast majority of users are far more ok with being shown ads than paying the equivalent of the cost of the ad to have it go away. What if the ad were not in the picture at all, and you had low friction micropayments? There are YouTube channels which eschew advertisements and get most of their money from Patreon instead. There are other channels that have been demonetized against their will and have gone this route as well. It's workable, and yet, Patreon is far from the lowest friction it could achieve. If there was some party able to make micropayments work, and able to make them not ever work, it would be Google.
    - ucaetano 8y ago
      > What if the ad were not in the picture at all, and you had low friction micropayments? Again, people don't want to pay for content. Between one website asking you to pay $0.10 to view an article, and another offering it for free but showing ads, people will pick the free one. And Google has been trying: https://www.theguardian.com/technology/2014/nov/21/google-contributor-pay-remove-ads https://www.theguardian.com/technology/2014/nov/21/google-co... But it is really hard to convince people to pay, when they can get it for free.
skybrian 8y ago
Desert of profitability is an evocative phrase, but remember that deserts can be beautiful. It means free stuff or low prices for consumers. This is another consequence of the "invisible hand" which is sometimes used to justify capitalistic competition. A commodity market working well is also a desert of profitability. The opposite of a desert of profitability is economic rent.
- kaycebasques 8y ago
  > “The opposite of a desert of profitability is economic rent.” Or perhaps an Amazon ;) I don’t know if the analogy makes any sense, I just couldn’t resist
- zapita 8y ago
  > It means free stuff or low prices for consumers. The "free stuff" is an illusion, a monopolistic sleight of hand. Consumers are subsidizing "free stuff" in one market by paying excessive rent in the neighbouring market. In the end, consumers pay more, not less. > This is another consequence of the "invisible hand" which is sometimes used to justify capitalistic competition. These deserts are not a feature of competition, they are an attempt to avoid competition by shrinking the pool of viable competitors. > A commodity market working well is also a desert of profitability. No, it's the opposite of that. A commodity market working well is what you get when monopolistic tricks such as "deserts of profitability" have failed, and you are forced to compete the old-fashioned way. > The opposite of a desert of profitability is economic rent. Again, the exact opposite is true. Deserts of profitability exist to protect economic rent. Show me any "desert of profitability" and I will show you the economic rent that is subsidizing it.
  - ucaetano 8y ago
    None of your arguments make any sense when you take in account the fact that such business model has enormously benefited consumers. It just doesn't make any sense.
    - __jal 8y ago
sah2ed 8y ago
> 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 Your example actually shows the opposite and that's because conventional wisdom is often wrong. Conventional wisdom states that there is a direct correlation between market share dominance and excess profits which is why anti-trust laws target monopolies to protect consumers from price-gouging, but this characterization is not always the case, as Apple has proven by not pursuing a market-share focused strategy. Apple enjoys 87% of smartphone profits from a mere 18% of all shipments [0]. [0] https://www.investors.com/news/technology/click/apple-rakes-in-bulk-of-smartphone-profits-but-small-slice-of-unit-sales/ https://www.investors.com/news/technology/click/apple-rakes-...
- Puer 8y ago
  That's because for Google the loss in per-unit sales of cheap phones versus $1000 iPhones is entirely made up by the data they're collecting from Android users.
  - scarface74 8y ago
    Not entirely. The largest phone markets - China and India - don't have integrations into Google. They took the open source version of Android to use with their own phones.
    - ucaetano 8y ago
      India does have, only China doesn't.
- jessriedel 8y ago
  How are you disagreeing with him? Just because the luxury/high-end part of the market is making most of the profits doesn't mean a luxury company wouldn't extract even more money with few competitors.
  - 8y ago
mistrial9 8y ago
another analogy is simply the Feudal Castle system
MichaelMoser123 8y ago
But wouldn't that work against Google app engine? Who would pay lots of money for cloud services if it's impossible to make a living from the results? Also these big companies have so many competing interests - how do these empires manage internal conflicts of interest?
- solomatov 8y ago
  Google app engine isn't the biggest source of revenue for google.
  - MichaelMoser123 8y ago
    Don't know how much they make but there is a lot of money in cloud services, just ask Amazon
    - solomatov 8y ago
      They have GCP which is different from App Engine. App Engine is a small part of it.
    - solomatov 8y ago
      Also, we can consider GCP as a complement to their main source of revenue, advertising. Companies need to host their content somewhere and other cloud providers could in theory corner them in the ads market, so they decided to protect themselves in this way. They even can afford to operate at a loss.
- amelius 8y ago
  Perhaps the App engine is intended to aid in creating that desert of profitability.
techsin101 8y ago
What course is that
javajosh 8y ago
* 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* Ah, a light-bulb goes on when wondering why Google spends on CDN and DNS services. (The additional internet telemetry-streams are nice-to-have but probably not the actual point, economically speaking.)

sah2ed 8y ago

FWIW, the expression "create a desert of profitability around you" is more popularly expressed as "create an economic moat".

Symmetry 8y ago
The ideas are more different than the analogies are. A moat would be things like patents, data, expertise, etc that a competitor would need to get to match you and which are hard to develop. That doesn't have anything to do with the profitability of nearby market niches.
- ucaetano 8y ago
  Exactly! A moat is less efficient than a desert. A moat is highly susceptible to niche entrants who might expand into your main market after, but a desert leaves no to little money on the table for anyone else.
  - sah2ed 8y ago
    You are correct, if you believe competition in the marketplace (or the battlefield) is linear -- where enemies/competitors lunge at you in turns, one at a time. If you do not believe that competition is linear, then it cannot be true by any stretch of the imagination that a moat is "less efficient" than a desert. A moat/desert/<insert metaphor> is only one of many tactics employed to win battles. IOW, it is not a strategy as you seem to be implying with this reply.
    - ucaetano 8y ago
      > it cannot be true by any stretch of the imagination that a moat is "less efficient" than a desert Nope, a moat protects a profit center by creating barriers to entry in the form of competitive advantages. A desert kills profit centers that could be used to attack your own profit center. Competitors can't leverage neighbor markets as an entry point, they can only attack your core business directly. You can have both, but a desert end up being more efficient for the simple fact that it reduces the total amount of profit to be had in the market, draining competitors of resources. The desert of profitability is the Russian winter of business models (with all the "Russian winter" caveats, so let's not go down the route of discussing if it was actually the winter or German lack of fuel, or Napoleon's whatever): you don't need strong moats when enemies die before reaching your walls.
      - sah2ed 8y ago
        > A desert kills profit centers that could be used to attack your own profit center. Competitors can't leverage neighbor markets as an entry point, they can only attack your core business directly. Great! You are essentially proving my point that they are tactics that can only be effective in tandem. A desert of profitability tactic is only feasible if you are already awash in profits. In other words, a moat must necessarily exist to justify the expense of sabotaging your competitors' defenses, otherwise, if they prove to be resilient (Intel+AGP vs PCI) or launch a surprise counterattack, you are toast.
        8y ago
- sah2ed 8y ago
  The problem with this argument is that it is a gross simplification of reality. Terms like "market", "nearby market", "niche" etc are all abstractions the same way a map is an abstraction of an actual territory. They help us reason clearly but they should not be used as a substitute for the real thing ala "the map is not the territory". A "desert of profitability" is essentially a battle tactic -- a tactic where you delay the use of your moat (fortress, trench etc) by igniting trouble elsewhere, usually in neighboring lands that enemies must traverse before the war reaches your own land. IOW, it is a tactic used in conjunction with other tactics, it is not a strategy; all it does is buy you time. Eventually, the technology landscape will shift and such economic moats, no matter how deep, will lose their relevance.
nostromo 8y ago
Those aren't equivalent concepts. A moat can refer to any number of strategies to protect your business from competition.

jacquesm 8y ago

> 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 In the case of Apple vs Android I'd say Apple is doing pretty good and are arguably doing substantially better than Google in spite of not having followed this strategy themselves.

ucaetano 8y ago
> In the case of Apple vs Android I'd say Apple is doing pretty good and are arguably doing substantially better than Google in spite of not having followed this strategy themselves. They follow a different strategy: vertically-integrated walled garden.
TrainedMonkey 8y ago
Apple is not making money from links.
dasil003 8y ago
The strategies are orthogonal. Google's interest is not in making money from smartphones, it's in preventing Apple from having a monopoly wherein they can charge Google unlimited amounts for access to mobile users.
- scarface74 8y ago
  But Google still pays Apple $3 billion a year.... https://www.cnbc.com/2017/08/14/google-paying-apple-3-billion-to-remain-default-search--bernstein.html https://www.cnbc.com/2017/08/14/google-paying-apple-3-billio...
  - dasil003 8y ago
    Exactly. Can you imagine how much it would be if Apple had a monopoly on smartphones?
    - 8y ago

AnimalMuppet 8y ago

I think that Google was more worried about Microsoft dominating smartphones, not Apple. Microsoft would be tempted to use smartphone dominance to steer search traffic to Bing rather than Google.

ucaetano 8y ago
> I think that Google was more worried about Microsoft dominating smartphones, not Apple. Maybe initially, before the iPhone. But the iPhone was the Dreadnaught of phones: everything that came before it became instantly irrelevant (look for HMS Dreadnaught). > Microsoft would be tempted to use smartphone dominance to steer search traffic to Bing rather than Google. Just as Apple would as well, unless Google pays, which it does.
- sbhn 8y ago
  Google also use to pay Mozilla Firefox millions. I don’t know if it still does.

rayiner 8y ago

See also Google’s efforts to commoditize content: https://en.m.wikipedia.org/wiki/Viacom_International_Inc._v._YouTube,_Inc https://en.m.wikipedia.org/wiki/Viacom_International_Inc._v.....

rushabh 8y ago
It’s not as simple as that. Google did not go out to commoditize content. Technology created a new distribution system that allowed them to dominate the distribution of content. If you read the case, many of the videos Viacom was asking Google to take down, were uploaded by Viacom themselves. So everyone was scrambling to get more eyeballs, that ultimately led to commoditization. Also referring to the parent post, “desert” is not the right analogy when you create surplus around you to keep out competition. I think the knowledge industry is more like a religion, where the information is free but there are still strong structures that support it. In case of religion, these structures are supported by supportive communal relationships. In technology, by massive network effects.

suyash 8y ago

Exactly, most people don't realize this simple strategy and worship at the altar of Google for giving "free" software. e.g Chrome is free and google wants to push for web technologies only because their cash cow (Web Advertising) can keep generating profits as long as there are more web users specially the ones whose behavior can be easily tracked on their browser.

ucaetano 8y ago
> Exactly, most people don't realize this simple strategy and worship at the altar of Google for giving "free" software. Yeah, people should stop idealizing and worshiping companies. Apple is only pursuing "privacy" because it tried and failed miserably at user monetization, but it won't think twice about handing over all your data to the government (like they did in China) if that's the best business options. They're all companies, they're here to make a profit. That's one reason why I find it easier to trust companies than to trust governments. I know exactly what companies want, so I can predict how they'll act. Companies are that "friend" who will always get money from your wallet, whenever they have a chance. Governments are those friends who swear they are on your side and want to help and protect you, but will sneak their fingers into your wallet whenever you're not looking.
- sbhn 8y ago
  Governments are in the business of creating monopolies.
- baxtr 8y ago
  I think it’s more nuanced than that. Culture and values do matter in some companies, and, they are used in daily interactions. This will yield different results. Apple is no saint, but much more aligned with my values than google for example.

HillaryBriss 8y ago

> One example is using Android to prevent a monopoly on the smartphone side. yeah, good point. i think it helps us understand the Android ecosystem, its SDK, its user base, etc. it doesn't seem like Google, a search and advertising company, had a natural reason to enter the mobile phone OS market. and they didn't set out to create an "insanely great" mobile OS experience, either for the users or for the developers. instead, the strategy was apparently to just shoehorn a camera OS into the mobile phone market, offer it for free, grab as many users as possible, and thereby disrupt/restrain Apple. and it has worked quite well for Google. but Android has subjected users and developers to a pretty bumpy ride. a lot of people went along for that ride because the upfront costs appeared to be lower than Apple/iOS. i don't know about the longer term costs though.

ucaetano 8y ago
Yep, one strategy analysis that I (sadly) rarely see being done is evaluating the value chain. Essentially, you look at all the links on a value chain and look at how competitive each one of those markets are. The links with the least competition will capture most of the excess profits in the chain, and the links with the most competition tend to be commoditized and have zero economic profits (which are different from financial profits). Taking Google's online ads value chain, for example: Chipset & component makers > device makers > OS makers > browser makers > ISP/carriers > online platforms > content creators > advertisers > ad platform > users (You could rearrange this in a few different, but still valid, ways) What would happen if there was a single device maker? Or a single OS maker? Those would be able to yield monopoly pricing, capturing most of the profits in the value chain. Now look at those links: in how many of them Google operates now in a strong way? - Device makers (Pixel) - OS makers (Android, ChromeOS) - Browser makers (Chrome) - ISP/carriers (Fi, Fiber) - Online platforms (YT, Blogger, G+, sites, etc.) - Content creators (indirectly, sponsoring) - Ad platform (Adsense & Doubleclick) Now look at where it makes money: - Ad platform (Adsense & Doubleclick) All those other businesses exist to protect the revenue-generating business.
- HillaryBriss 8y ago
  nice. one of those links i personally find interesting is "content creators." on the top end, it appears that a handful of the apps in the Google Play Store make the lion's share of the revenue (e.g. Facebook, Google itself, and some really strong game companies). at the same time, i've heard estimates that 50% of the independent app creators earn less than $500 per month. and it's getting worse. in short, the android app market was quickly populated by a huge number of independent app creators (who presumably thought it would be a good, durable, new line of business). but, for the most part, these app creators became a low-income-neighborhood/swamp around the top app creators. but Google still (indirectly) benefits from this arrangement because it offers the appearance of a free, open, lucrative, land of opportunity -- a healthy marketplace.

stcredzero 8y ago

- 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. By this logic, the biggest force in the universe preventing micropayments by tying media to the tawdry, corrupting mechanism of advertising, is Google. A desert of profitability shifts consumers to you, and keeps competitors away. Cities are supposed to impoverish the regions directly around them in this way, as well.

ucaetano 8y ago
> By this logic, the biggest force in the universe preventing micropayments by linking media to the tawdry, corrupting mechanism of advertising, is Google. No, it is users being willing to pay. The vast majority of users are far more ok with being shown ads than paying the equivalent of the cost of the ad to have it go away.
- stcredzero 8y ago
  The vast majority of users are far more ok with being shown ads than paying the equivalent of the cost of the ad to have it go away. What if the ad were not in the picture at all, and you had low friction micropayments? There are YouTube channels which eschew advertisements and get most of their money from Patreon instead. There are other channels that have been demonetized against their will and have gone this route as well. It's workable, and yet, Patreon is far from the lowest friction it could achieve. If there was some party able to make micropayments work, and able to make them not ever work, it would be Google.
  - ucaetano 8y ago
    > What if the ad were not in the picture at all, and you had low friction micropayments? Again, people don't want to pay for content. Between one website asking you to pay $0.10 to view an article, and another offering it for free but showing ads, people will pick the free one. And Google has been trying: https://www.theguardian.com/technology/2014/nov/21/google-contributor-pay-remove-ads https://www.theguardian.com/technology/2014/nov/21/google-co... But it is really hard to convince people to pay, when they can get it for free.

skybrian 8y ago

Desert of profitability is an evocative phrase, but remember that deserts can be beautiful. It means free stuff or low prices for consumers. This is another consequence of the "invisible hand" which is sometimes used to justify capitalistic competition. A commodity market working well is also a desert of profitability. The opposite of a desert of profitability is economic rent.

kaycebasques 8y ago
> “The opposite of a desert of profitability is economic rent.” Or perhaps an Amazon ;) I don’t know if the analogy makes any sense, I just couldn’t resist
zapita 8y ago
> It means free stuff or low prices for consumers. The "free stuff" is an illusion, a monopolistic sleight of hand. Consumers are subsidizing "free stuff" in one market by paying excessive rent in the neighbouring market. In the end, consumers pay more, not less. > This is another consequence of the "invisible hand" which is sometimes used to justify capitalistic competition. These deserts are not a feature of competition, they are an attempt to avoid competition by shrinking the pool of viable competitors. > A commodity market working well is also a desert of profitability. No, it's the opposite of that. A commodity market working well is what you get when monopolistic tricks such as "deserts of profitability" have failed, and you are forced to compete the old-fashioned way. > The opposite of a desert of profitability is economic rent. Again, the exact opposite is true. Deserts of profitability exist to protect economic rent. Show me any "desert of profitability" and I will show you the economic rent that is subsidizing it.
- ucaetano 8y ago
  None of your arguments make any sense when you take in account the fact that such business model has enormously benefited consumers. It just doesn't make any sense.
  - __jal 8y ago

sah2ed 8y ago

> 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 Your example actually shows the opposite and that's because conventional wisdom is often wrong. Conventional wisdom states that there is a direct correlation between market share dominance and excess profits which is why anti-trust laws target monopolies to protect consumers from price-gouging, but this characterization is not always the case, as Apple has proven by not pursuing a market-share focused strategy. Apple enjoys 87% of smartphone profits from a mere 18% of all shipments [0]. [0] https://www.investors.com/news/technology/click/apple-rakes-in-bulk-of-smartphone-profits-but-small-slice-of-unit-sales/ https://www.investors.com/news/technology/click/apple-rakes-...

Puer 8y ago
That's because for Google the loss in per-unit sales of cheap phones versus $1000 iPhones is entirely made up by the data they're collecting from Android users.
- scarface74 8y ago
  Not entirely. The largest phone markets - China and India - don't have integrations into Google. They took the open source version of Android to use with their own phones.
  - ucaetano 8y ago
    India does have, only China doesn't.
jessriedel 8y ago
How are you disagreeing with him? Just because the luxury/high-end part of the market is making most of the profits doesn't mean a luxury company wouldn't extract even more money with few competitors.
- 8y ago

mistrial9 8y ago

another analogy is simply the Feudal Castle system

MichaelMoser123 8y ago

But wouldn't that work against Google app engine? Who would pay lots of money for cloud services if it's impossible to make a living from the results? Also these big companies have so many competing interests - how do these empires manage internal conflicts of interest?

solomatov 8y ago
Google app engine isn't the biggest source of revenue for google.
- MichaelMoser123 8y ago
  Don't know how much they make but there is a lot of money in cloud services, just ask Amazon
  - solomatov 8y ago
    They have GCP which is different from App Engine. App Engine is a small part of it.
  - solomatov 8y ago
    Also, we can consider GCP as a complement to their main source of revenue, advertising. Companies need to host their content somewhere and other cloud providers could in theory corner them in the ads market, so they decided to protect themselves in this way. They even can afford to operate at a loss.
amelius 8y ago
Perhaps the App engine is intended to aid in creating that desert of profitability.

techsin101 8y ago

What course is that

javajosh 8y ago

* 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* Ah, a light-bulb goes on when wondering why Google spends on CDN and DNS services. (The additional internet telemetry-streams are nice-to-have but probably not the actual point, economically speaking.)