In my mind search, email, calendar, cloud, drive are all separate services. Just because I use Google Search doesn't mean I use google drive and gmail. In fact, I use Microsoft's OneDrive most of the time instead of Google Drive, and I don't use Calendar at all (much prefer Outlook).
You do not have to build out that entire list to compete with Google - you can build and compete with a superior version of just one. Even indie developers can (and do - successfully) compete with services like Calendar.
Example: now that Google says that they don't mine email / calendar / docs data for ads, that means they don't make direct revenue from those services - unless a user pays for them directly a la G Suite or Google Drive pricing. Therefore Google leverages strong market share and revenue from Search to invest in these services to bundle them and offer them for free.
In theory any other company can build individual blocks, but most likely could not (1) offer them for free, nor (2) address the switching cost that a user of Google's services does not have (i.e. having multiple tabs or different applications opened to use email + calendar + files + etc.) If this wasn't a technology company, but like a p&g company, hypothetically, this would be clear cut monopolistic behavior.
That said, it's a thorny issue and I could see both sides, and the technology market landscape necessitates an analysis of our definitions of monopoly / market share / competition, etc.
- Matthew Hindman, "The Internet Trap", 2018 (p. 174)
The last sentence of the quote is false; only a small fraction of that money was spent on "building the search engine". Again, the relevant point is whether you can offer an alternative, which MS (and several others) have done with a fraction of that $12 billion. If it's difficult to offer something better because the top provider is legitimately the best at it, that's not the worrisome monopoly we should worry about.
Imagine the comparable investment to make a different OS that runs MS Word and getting a home user to use it instead of Windows/Word. Or running an alternate rail line from San Jose to San Francisco.
2. How can we know that the only reason Google can keep being the best out of incumbents is because of past network value. e.g. if a competitor had access to the same amount of historical sea h data as Google, could they use it in a better way?
It is monstrously hard to offer alternatives. The barrier to entry is the massive engineering effort to compete.
Google is not just a search engine. It is an email server and client, a calendar, an online office suite, a cloud provider, a mobile platform, and I can go on listing things to fill up several pages of what Google is.
Even if DuckDuckGo is a better search engine, it offers 1% of the feature set and can't compete. The engineering effort needed for it to compete effectively is astronomical. Imagine what it would take to build out all of those Google services that are tightly integrated and not just build them out (like Microsoft), but build them out well. That is the barrier to entry.