Today, Google announced that it will move into the travel space with its $700 million acquisition of ITA, a flight information software company. If I were Eric Schmidt, I'd be spending my best talent and efforts trying to figure out the social space being dominated by Facebook -- not vertically integrating into different information industries. Now, I'm always wary of saying that newly minted billionaires don't know what they are doing, but it seems to me that the data embedded in social graphs is much more important than going into the product suite for airfare pricing and shopping, reservation management, and internet booking -- which are ITA's core products.
I will not be so bold as to suggest that Google jumped the shark, because their core business of advertising and their foray into mobile with Android promise continued growth for a long time to come. But, to me, Google is the most horizontal of all horizontal businesses, and to go deep into one industry seems like the wrong way to go. The big horizontal play now is social and there will be new ones like Foursquare for location-based social, and Twitter and to my eye, those organizations are more relevant to "organizing the world's information" than travel seat choice and pricing.
The scalability of Google comes from modular functionality and tagging architectures. The page link, the video, the tweet, are all modular, and user generated content. With ITA, they move to an industry generated content, and an information service that is more about logic and algorithms based on proprietary databases that have functional interaction with user. Put another way, until ITA, I don't think Google really had any issues of integrating with specific industry customer's operational needs. (Maybe they do with Google docs, but again that's a "horizontal" product.) When they have to integrate into the logic of the operations of the vertical known as travel, their innovation assets become less generalizable, and thereby have less option value.
I think they have plenty of new horizontals to explore -- including social, local social, and new asset tags based on emerging sensors and telemetry in vehicles. Heck, the military still needs a ton of help just dealing with the massive amounts of video that the new drones are capturing. They have many, many more cameras hanging off of them.
My vote would be that Google should stay horizontal for some time to come and stick to the proposition of organizing the world's information a bit more closely.