Who remembers WebCrawler, Lycos, AltaVista, Ask Jeeves (now Ask.com), Hotbot, or Dogpile? For those of you early web users, the names will recall slowly loading pages and web 1.0 graphics. These companies make up a list of search engines that predated Google. Not to mention Yahoo! which doesn’t require distant recollection. For WebCrawler (the world’s first text based search engine) and Lycos, we’re talking a solid four years of in-market activity before Google entered the scene. People generally scoff at the little companies that hop onto the bandwagon of whatever shiny new market opportunities arise, dismissing them as “me-too” companies. But Google is also a me-too company, and it has certainly proven that me-too companies may not always be a bad idea. Especially given its current 66% search market share and $190.2 billion valuation. So it got me thinking; when do you shelve your business idea in the face of strong market competitors or jump into the fray of a market opportunity as another ‘me-too’ company?
By my way of thinking, it really comes down to a handful of factors. I’ve made a checklist of considerations to mull over before taking the entrepreneurial plunge.
- Distinctive Offering – I’ve heard claims that the distinguishing factor to Google’s success was the simplicity of its interface; the stripped down, bare search bar. But looking at the early designs between Google and the other early search competitors, there’s not that much of a difference. The most distinctive component of Google’s offering was PageRank. PageRank along with an incredibly talented crew of engineers made Google’s search experience the best on the web. There’s a lot more to add here which contributed to Google’s success, but I’m going to leave it at that for now.
- Capital – If you’ve got more luchini than the next guy, be prudent but use it to your advantage.
- Focus – Yahoo! was in the search business since March of ’95 but hadn’t focused on that aspect of their operation with the laser precision in the way Google did. Moreover, if you’re observing a lack of focus in a market, dive in and apply that laser edge.
- Cost – This one is pretty obvious but determine how much it costs the competition to acquire new customers/deliver their services/manufacture their products and figure out if you can do the same thing for less… sustainably.
- Timing – If you have an idea in which you’re going to create a micro-blogging platform in which users can shoot off quick bursts of text based information, you’re a little late to the game. You’re probably even late to the social photo-sharing app game already. On the other hand, you might want to hold off if you see competitors jumping in too early like B2B online marketplace Ariba did back in 2000.
- Blood In The Water – This is a sexier way of saying ‘if you see poor execution, counter, and attack with great execution.’ Friendster is an example that comes to mind here. Myspace sensed blood in the water as Friendster couldn’t deliver a service that loaded profile pages within forty seconds time which is shameful (and to say it was 2003 is no excuse). Needless to say, Myspace out-executed Friendster at the simple task of processing along with a list of another feature add-ons, etc. [For a good, detailed breakdown of events, this is a good read from the Times]. Then, of course we all know the story of how Myspace got Facebooked which hardly needs further analysis. Another example here would be Plurk aka the Twitter clone. Some of you may recall Twitter’s fail whale which represented essentially the same problem that Friendster experienced. Plurk launched right at the point in which many Twitter users were becoming increasingly frustrated with the amount of down time and were open to switching to a new medium. I personally recall experimenting with both. But this story plays out differently in the end (obviously) as Twitter was able to scale their processing requirements. Tech readers back me up here, but I believe they restructured their database architecture to a sharding design?
Location – For non-web based companies, location will certainly play a roll in sizing up your market opportunity. But how about for web based businesses? I suppose if your zip code is 94301 you would likely have a better chance at success than starting your me-too company in the Yukon. I’d love to hear further thoughts on this.
A friend of mine recently described a concept he has for a LBS app which was the real catalyst for this post. I thought it was a really interesting idea, and a unique spin on what already exists in the market. Given LBS is one of the newer (but getting old in internet years) ‘shiny market opportunities,’ the major events have yet to play out. Foursquare, Gowalla, SCVNGR, and now Facebook are all active players in the space making for stiff competition. I should know better than to pose questions to my readership base of three visitors, but I’ll pose the question anyway to see if I can drum up some dialogue here. The question is two fold:
- Is there anything you would add/remove/refine in the me-too checklist?
- Based on this checklist, how would you size up the LBS market opportunity right now?