Don't Fight Data Moats

Understanding how data moats form isn't about mourning losses.

It's about identifying which markets still have open windows… and which battles aren't worth fighting.

We call it "network effects." But that's wrong.

The network isn't the moat. The data from the network is the moat.

The barrier isn't people… it's the predictions those people make possible.

Watch what happened to Google's search competitors.

1998: Multiple search engines compete. Google's algorithm is slightly better, gains modest user advantage.

Nothing dramatic. 5% edge, maybe less.

1999: More users means more searches. More searches means more data about which results people actually click.

More click data means better ranking predictions. Better rankings mean more users.

The cycle accelerates.

2003: Competitors can't catch up. Not because they lack engineering talent. Not because Google's algorithm is 10x better.

Because Google has 5 years of click data. Billions of queries revealing what people actually want.

If more users generates more data (A), and more data enables better predictions (B), and better predictions attract more users (C), then any early user advantage compounds irreversibly into dominance.

The causality is linear. The outcome is inevitable.

This is why Microsoft spent billions on Bing and couldn't close the gap. Better engineers, unlimited capital, identical algorithms… none of it mattered.

The data moat was already unbridgeable. Google had the prediction infrastructure. Bing had to build it from scratch while competing against it.

The advantage isn't temporary.

It's structural.

But data moats are permanent within a paradigm, not across paradigms.

This is why disruption requires paradigm shifts, not better execution. TikTok didn't outcompete Instagram at photo feeds… it moved to algorithmic short video.

AI search isn't competing with Google's ten blue links… it's moving to conversational answers.

Different game, different data requirements, open window.

Most market dominance isn't because one company is dramatically better. It's because network effects compound small leads into permanent advantages through data feedback loops.

Like the expectations ratchet in instant information access… once the moat forms, it doesn't unform.

Now you know what to look for:

Which markets haven't formed data moats yet?
Which paradigm shifts are opening new windows?
Which battles are already over?