Google's Vertical Integration: Competition With Partners
Aug 02, 2011
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What happens when your best partner in business begins moving in on your business? Suppose you own a shipping line, and one of your biggest customers is an iron manufacturer. You would like become very nervous if your customer starts shopping around for a shipping company to buy. That's exactly what happened in the late 1800s in a pioneering effort of vertical integration led by Andrew Carnegie.
Vertical integration is a strategy of expanding into additional areas of business within the same industry. It didn't make Carnagie a lot of friends in the steel industry, but it did make him (arguably) the second wealthiest man ever to have lived, right behind Rockafeller.
Amidst a flurry of new acquisitions - such as the purchase of The Deals Map yesterday - Google has begun setting almost everyone offering an online product or service on edge. Google's progress has been subttle, but we have seen them move slowly into online video, payment systems, travel, shopping and price aggregation, maps, traffic, directions, and placed ads. Consider, for a moment, that we used to visit sites like Mapquest. These are all examples of vertical integration from Google that turned formerly successful partners into frustrated and often-failing competitors.
What's next for Google? While the company is making headlines with their expansion into social networking (and social gaming likely to follow), Google is moving in more than one direction. If I were a cable company, I would be very concerned about their high speed Internet. If I were a hosting company, I would be very concerned about the future of the Page Speed service.
Google is beginning to turn the heads of regulators, who have been fielding a stream of complaints from partners-turned-competitors. With the threat of FCC, FTC, and Justice Department investigations, to say nothing of European regulation, Google is trying its hardest to tread lightly while continuing its growth.
Does Google's integration of services hurt the consumer? Certainly the companies losing money would say so, but the price of oil was never lower than it was before the US government split up Standard Oil. What are your thoughts?
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