The Wizard, previously known as Dick Costolo of Feed Burner, talks of hidden barriers to entry in his recent post, Strategic Advantage, Part II.
Hidden barriers to entry are particularly helpful to your company because potential competitors will severely underestimate the level of investment and resource commitment required to compete with you.
For any unfamiliar with the concept, a hidden barrier to entry is an imaginary force aimed at convincing lighter, hungrier teams with superior ideas not to swarm the tower. If it wasn’t clear just then, I hold a fair amount of skepticism of market barriers (hidden or otherwise) and their ability to ward of competitors. And I almost never view external forces as part of a strategic advantage. If I can overcome an external force, so can someone else. Or they can find a way around it.
I’m not saying market barriers don’t exist or that challenges don’t increase in size and frequency with scale. They do. The distance / difficulty of course between the category killer and chase crew is often far more significant than it appears. This is certainly a reality for Feed Burner.
But the word barrier is too strong a term. Single points of competition and clearly defined markets are rare. Competitors don’t even have to look like you. Where are the quantum hidden super secret barriers insulating Feed Burner in a case where WordPress and TypePad and Blogger decide to offer subscriber stats directly? Would a new blog need Feed Burner?
Peter Cooper of FeedDigest redirects the point a bit in the comments. Peter writes that external forces don’t keep others out of a space, but internal forces definitely exist to keep them from competing.
…a lot of wanna-bes try to rig up free services that do a similar task, but they never scale!
In other words, there’s more to penetrating a market than crossing a wall or moat. Entrants jump in, find they can’t swim and just kind of flail about, not really going any where. The ability to scale and provide accountability is a competitive distinction.
Way back in the day, Steve Rubel chastised our work on Feed Rinse as an effort that failed to create a moat before charging a fee. Steve is right. (Oh Snap!) We didn’t work to create barriers to keep competitors from invading our tiny kingdom. But that wasn’t our aim. We were actually hoping to see other entrants to the space.
Peter Cooper left a comment on Steve’s post as well (this guy must be omnipotent omnipresent.) In addition to clueing in Rubel on the differentness of ZapTXT and Feed Rinse, Peter suggests that barriers to entry are often low, and moats don’t stop others from wading in. Nor does it matter. True strategic advantage – not external barriers to entry – will separate the players.
The services that we provide and the applications we develop are creative solutions. The technology behind them can be mimicked, and there are no market barriers to entry (obstacles maybe, but not barriers.) It’s the internal forces, rather than market conditions, that serve as strategic advantages over the competition and make ventures successful.
A point I do agree with The Wizard on is this: it makes a lot more sense pressing forward than it does creating barriers behind you.
4 Responses to “Hidden barriers to entry and other fairy tales”
Omnipresent. However.. most would just say I don’t get out enough ;-)
I guess my real opinion on all of this is that it’s never a good idea to pretend to be something you’re not, but also to be proud of what you are. There’s a small group of services in this area, FeedRinse included, that are clearly professional, well developed, and able to deal with a reasonably amount of scale.
Sadly, all of this is mostly invisible, and I think that results in an invisible barrier many developers don’t appreciate. The thing I pride most about Feed Digest is that it can happily serve hundreds of millions of requests each month each within a second within no significant blips. FeedBurner is about ten times or more than that.. and FeedRinse.. well you’d know the numbers on that :)
I must admit I’m surprised to see FeedRinse going all-free, but I’m guessing your agency is doing well enough otherwise that it’s a bonus side project. And.. I think things might all go that way in this field for regular users. They’re too used to free nowadays. It’s the businesses and enterprise customers who’ll pay.. and that’s another significant boundary.. having those contacts and the sales talent to hook the money clients, but that’s another story. :)
Omnipresent, yes.
I agree, “available” and “valuable” are two different things. And I think the Web 2.o push has encouraged a lot of immature entrants that don’t understand how to position themselves as a paid service. Until Feed Rinse, I didn’t think I liked subsidizing one venture with another, but other factors came into play.
You’re right about enterprise – higher expectations (accountability, revenue, etc.)
Nicely written Aaron.
I also think undue attention gets paid to “the space” very often. I don’t think there’s a definition yet and there shouldn’t be one for ’spaces’ that are still nacent. Very often, a focus on solving specific pain points instead of measuring up against some imaginary industry starndard and you’ll be fine.
Say hi if you are ever in the bay area.
Cheers, Sameer
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