They did it through backward vertical integration.
Vertical Integration is expanding to take over the supply chain and production path of a single product.
It could be forward, or it could be backward.
For example, forward could be a manufacturer of car parts, acquiring a car dealership.
Backward could be a car dealership acquiring a manufacturer of car parts.
Vertical integration helps achieve economies of scale (that is the quantity of products).
Horizontal Integration, in contrast, is expanding to the production of multiple products in one part of supply chain and production path.
For example, it could be a manufacturer of car parts, acquiring a retail store.
Horizontal Integration helps achieve economies of scope (that is the number of product types) and a monopoly.
Pornhub used the former to become the biggest adult entertainment website in the world.
In order to become rich in online adult entertainment, you need to control a lot of pay sites.
Yet to control pay sites, you need to own them.
So to buy pay site, need to force them to sell.
And a way to force them to sell is by making them unprofitable.
To make theme unprofitable, you need to flood the market with free versions so they can’t make a profit.
To flood the market, you need to control (own) multiple free sites.
Free sites get sold because they don’t make much money off advertising and get a lot of DMCA takedown notices.
According to Jon Ronson’s The Butterfly Effect, the owners wanted to get out of the business.
He changed the name to Manwin and got a $362,000,000 loan from Colbeck Capital to acquire more free sites.
Genius!
SEO.
Many of the large tech giants are doing the same.
A while back the following Infographic was posted on the internet:
Yet, I knew this wasn’t the full story.
These companies wanted to own distribution just like MindGeek wanted.
They knew that if they could own distribution, vertical integration would be far easier.
Now the following Infographic is being posted on the internet:
These tech companies now have distribution and are moving into product to build their profits.
Uber was haemorrhaging money to build the infrastructure and network when they started.
Why do you think they raised $22.2B?
They wanted to prove and connect.
Now they have that, they are going to recoup their money on the product end and won’t pay drivers.
Now they all will integrate and grow.
It’s a bad time to be an Uber driver.