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First mover, my foot

[I'm off today to go skiing with my cousins and brother; back next week....]

I remember discussing the whole Internet bubble thing in March of 2000 — right before it burst, of course, but after people in the business saw it slowing — with my boss at Hungry Minds (Stuart Skorman). That we weren't making any money was no news, and no surprise either; the whole game was to make money off investors, not customers. In that light, he was savvy and I naive: Businesses were struggling, I suggested, because the market for Internet services was not yet mature, but wait 10 (or however many) years, when those mouth-watering hundreds of millions of customers were finally all online, and then innovative Web companies could shine. In response, he simply recited the first-mover mantra.

I don't know if I was right, but it seems pretty sure the first-mover theory was, well, a little off target. (Though, to be honest, we don't really know for sure, because the first movers in the Internet industry failed because of business mistakes more than because of when they moved — had they spent their money more wisely, they could very well have grown into solid, profitable and mature businesses.) If it costs more money to dominate a market than you can make off that market, then of course market dominance is hardly an advantage.

And the advantages of observing your competitors' mistakes can be vital. This, I think, is the real moral of this New York Times article on how iWon took itself from the bottom of the totem pole into a position to buy Excite, which once saw itself as competing with Yahoo for top dog on the web portal mountain.

Yahoo, of course, had that fabled first-mover advantage, and has no doubt benefitted from it. But its position has hardly excluded other, smaller, more innovative and agile Internet companies from thriving in the same market. Time will tell, of course, but as the web matures as a medium for both content and commerce, I don't see the playing field shrinking, or any one player expanding to cover it all — rather, there will be increasing opportunity for smart, new companies to carve out their own niches.

December 27, 2001 1:49 PM

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Copyright ©2001-2003 Matt Pfeffer

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