At the height of the first dot-com boom, people salivated over the idea of a first mover advantage. Being the first e-anything meant you always had a step ahead of anyone trying to compete with you. Who would dare risk buying poodle clothes from anyone else but ePoo.com: the world’s first online business for all your poodle-clothes-buying needs? Yes, you’re going to ePoo.
We soon learned that First Mover was more myth than reality. The advantages were overblown, and the disadvantages underrated. To truly succeed as a First Mover, you had to be lucky enough to answer all the initial questions right – and, that’s nearly impossible to do. The “fast followers” would swoop in like vultures, right your wrongs, and own the market. Frankly, most companies failed because they didn’t even create a viable market. BTW, I’m still waiting for my Twix Bar and Swingers DVD from Kozmo.com.
In today’s ever-popular web-based software model, there is almost zero advantage whatsoever of being a first mover.
First, there’s little incentive for customer loyalty. Rarely does web-based software require any initial long-term commitment. Most offer a free version, and paid versions are one-time-only or month-to-month. Even though this isn’t as good as the “everything-is-free-just-look-at-my-ads” web we were used to a few years back, it still favors the user tremendously. We are fickle by nature (especially the young ones), and letting us succumb to it with little financial recourse will just keep us being fickle. First movers who make too many mistakes won’t have the benefit of a customer base that’ll stick around because they
love you signed a two-year contract.
Secondly, we’ve found out that the Web is not a secretive place. NDAs rule out those who sign them (which means that 99.99% of the world is free to do as it pleases once your version 1.0 is released) and technology patents are too difficult, vague, and slow to mean much of anything. Thank you Elementool and FogBugz for the brilliant idea of web-based bug-tracking. Now, if you don’t mind, I shall build my own.
Finally, it’s just too easy for any potential competitor to start building web-based software. The new trend of building simpler, cleaner, enterprise-less apps means that, to compete in a market, you don’t need months of R&D and 100 full-time developers. Companies of one are learning to become successful. When you can find 10 different online to-do lists….well, maybe we’ve taken this too far.
Smaller companies and smaller offerings mean that it doesn’t take a billion dollars worth of annual sales to make a successful business. A billion dollars could reasonably make 1,000 successful small businesses. It means being mover number 163 still gives you a great shot at success.
So, count your blessings if you’re late to this market. There won’t be a 700 billion dollar bailout plan from Uncle Sam coming to rescue the pay-to-play online software market anytime soon. But then again, there doesn’t need to be.