The Competitive Moat of Google, Facebook and Other Data Owners

When I was building the Data Science Centre of Excellence at Reliance Industries, I once interviewed a world-class researcher who has worked at multiple institutions, including Yahoo and Google, and he told me something I didn’t understand till then. I thought a company like Google has a weak business moat because it is vulnerable to the next breakthrough in search and machine learning technologies. I was duly informed that I was wrong, and that Google will maintain its lead over competitors like Yahoo for a long time to come. The reason is actually simple: basically everybody uses the exact same machine learning algorithms and the one that has the best and largest collection of data will always win because the accuracy and performance of the models obtained from those algorithms are directly dependent on the input data. Furthermore, a large amount of poorly structured data often yields better results than a small amount of carefully curated data, as explained in the article The Unreasonable Effectiveness of Data:

Click to access 35179.pdf

Now you know why Google, Facebook, Amazon all actively encrypt their data. (This, incidentally, is one of the challenges telcos face in trying to monetise their data.)

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