Well sure they make it harder for some to "get returns off products" but its not a bad thing. Google returns that value to users. Like Google Docs, its sucking the margins out of word processing like Microsoft Office and returning that consumer surplus back to consumers. Google making things free to use isn't bad for users its bad for competitors.
No one owes you the ability to extract consumer surplus.
The point is that Google pushing margins so low that returns are below production costs. And the way they manage to do that is by transferring funds to cover that loss. No one can compete with that unless they have a secondary market to channel funds as well.
You may be able to get some customers with higher quality goods, but generally people go for the cheapest option. So its good for customers, up until competition and innovation dry up. Which is the normal out come of this situation (and then prices start to climb).
The clincher in the whole evil'ness about this is Google has set it up so the only way to compete with them is to buy ads off them. Total abuse of there monopoly IMO.
Yeah I agree, the rough approximation is Wal-Mart selling loss leaders to drive other higher margin sales. In the case of Google, we see they "sell" Google Docs for free to create network effects (and to erode the lock in of Office) and to cross promote other Google products. This is controversial but is hardly new in any industry.
Yes I agree that after a company gains market power there is an incentive to raise prices but I dont think there are many (any?) examples of Google switching a free product to a paid one.
You missed the point, Google isn't evil. Yes they make it difficult to compete but thats what successful companies do. The difference is Google does it by making simple disruptive products and prices them at their marginal cost. Google isn't a monopoly by any definition. Google isnt the single seller in any of their markets, Google doesnt compete in a market with high barriers to entry and Google isnt a price maker. Users (advertisers and internet service consumers) can easily switch to competing products and avoid Google entirely.
Google is powerful yes, but they create value by helping their users keep their money. Google has never made any promise to anyone else other than their users.
No one owes you the ability to extract consumer surplus.