People tend to think about this in binary terms but there are three options. Innovate even when you don’t need to, the Facebook strategy of over paying for any competitor that gets real traction, or the Newspaper approach of just milking a money maker into the ground then selling off the remnants. They are all completely valid and profitable options.

Facebook’s approach only works when regulators are asleep at the wheel, but standard oil style monopolies can just print money to cover these costs. Innovation is expensive and can fail regularly just look at Intel or most corporate R&D. Finally milking a dying business model can fail really quickly, just look at say blockbuster.