First mover advantage is definitely real

I was just reading a recent interview with serial entrepreneur Bill Gross. In it he says one of the things he’s learned is that first mover advantage is key. Instantly I thought of another truism (oft-repeated by venture capitalists) about how competitors validate the field you’re in, and that if you don’t think you have competitors, you’re either an idiot or your idea is crap. Are these two ideas at odds? Is the first mover always going to dominate? Several matchups came swarming into my head (Digg vs. Slashdot, Friendster vs. Myspace, etc), and a quick analysis proved that the two ideas are actually two harmonious parts of the same theory of Internet Entrepreneurship.

The conclusion I came to is that every web niche can have several competitors, and the first ones out often miss out on how to “do it right”. Once a company discovers how to “do it right” they can often achieve the first mover advantage that Bill Gross talks about, no matter who else is already in the field. Even then, there is still room for competitors to make money by playing a mean second fiddle. The following examples are what made these ideas hit home for me.

Digg vs. Slashdot - Slashdot was the geek news god long before Digg was a twinkle in Kevin Rose’s eye. Now Digg is much bigger simply because they tapped into the idea that the role of editor could be a democratic one that’s shared among news submitters and readers. Anyone can submit, anyone can vote, it’s appealing for the same reasons that democracy is appealing. Slashdot is doing well, but they are no longer top dog. However, before you are tempted to say that first mover advantage didn’t work out well in this case, remember that Digg was actually the first to make democracy the editor. So actually, first mover advantage (FMA for short) did work out extremely well for Digg. It is also interesting to note that while Digg is much bigger than competing social news sites like Reddit and Newsvine, both of these Digg competitors were still built, still garnered users, and were still acquired by other large corporations.

Friendster vs. Facebook - Friendster came out first and could have dominated with the right ingredients, but their site was slow and there wasn’t much to do after signing up. They were leapfrogged when MySpace allowed people to customize their profile and track their favorite bands and friends. The music angle was a huge factor that made MySpace seem cool. Later, Facebook proved that perhaps profile customization wasn’t as important as streamlined communication; I think their news feed feature is one of the most important advances yet for social networking (you have to admit it’s useful and it keeps you coming back for more). Also, Facebook had the whole student angle that helped give it an edge when it first started. In my opinion, the social networking space is still ripe for serious disruption (I hope to prove that with my next two startups :)).

Basecamp vs. other project management apps - Basecamp is simple but yet really versatile. The app focuses on efficient messaging and then it gets out of your way. Basecamp is also cheaper than most other project management web apps; they serve the “Fortune Five Million” as they put it. There are so many more lessons to learn from Basecamp. For instance, their sales page is one the best I’ve ever seen. It’s miles ahead of their expensive competition. My point is, Basecamp was the first to hit the right combination of simple features and pricing, and their strong following proves this. Because of this they have FMA.

Atomfilms vs. Youtube - So AtomFilms and other places like ifilm were once the online video destinations. But then this little startup called YouTube let anyone upload videos–their servers would even handle all the codec converting and hosting. Most importantly, by pasting a little snippet of code into your blog or MySpace page, you could show the world your video without having to worry that the server would go down or the loading would be slow. YouTube was the first to completely grease the wheels of online video, and they so completely met the pent up online need that they rode their new FMA to market dominance.

Yahoo vs. Google - I guess this one is so obvious that I don’t even need to go into it. Suffice it to say that Google realized that search was a cornerstone of Internet usage, and that it could be done way better. Then they figured out how to monetize it perfectly. From that simple two-step dance move, they set themselves up to be the online power broker.

It’s interesting that YouTube chose to be democratic, harnessing user content while providing them a valuable service for free. “Democratic design” seems to be a common thread in all the successes of recent “second movers” (like Digg, and many more I haven’t mentioned here). By embracing this democratic design, user-generated content, dissemination, and customization- these new sites are creating new FMAs. Their showing the old dogs that there are new tricks to be learned. They are even putting the old dogs to rest.

For myself, I always try to see new ways to make things social. I’ve said it before, but social networking is the most important breakthrough on the Internet, ever, and we’re only in the opening act. In general, for most online businesses, there are more angles of attack, there is more innovation to be had that will create new FMAs and make even these recent second movers sit up and take notice. So don’t be deathly afraid of competition, and never assume something has been done as well as it ever will be. If you can find a new angle of attack, you can gain users and perhaps even dominate. Heck, as Digg’s competitors show, you can often copy a business model and still find an exit courtesy of some larger corporation playing catchup.