Way back in 1995, there was this company called BHI. You might never have heard of it because later they renamed themselves GeoCities. GeoCities became the very first company that made web hosting available to the masses.
For the first time, users could express themselves on the Internet and share whatever they pleased, although it wasn’t always pretty. There were plenty of “edgy” pages featuring clip art, automatic music and tile images as backgrounds. Most GeoCities websites were left “Under Construction.” Many users had only signed up because their friends had, and didn’t see a real purpose for the page. This was the tipping point in which the mainstream audience no longer saw a specialist platform aligning with their own interests.
In late 2003, MySpace popped onto the scene. People quickly left GeoCities and started sharing their content with ease on MySpace. While MySpace wasn’t necessarily a reinvention of GeoCities, it was similar in the respect that people were using it as a medium of expression.
MySpace, while initially successful in its own respect, really blew up when they started focusing on the music industry. Unknown record labels could launch unknown talent into fame. However, that opportunity was never fully explored as News Corp changed the direction of MySpace once they acquired it. MySpace swiftly stopped listening to its users and tried to become a social network instead of owning the music industry.
So why are most specialist companies today still appealing to this mainstream customer base?
Appealing to a Wide Audience
The mainstream audience doesn’t need most specialist tools (like web hosting, maintenance, security, design, etc.) to begin with, and these tools generally come with an exceptionally high learning curve.
With the advent of mobile technology and improvements in Web 2.0 (yes, including HTML5), people who have specialized skills can now create so much more. But yet again we’re seeing service providers trying to entice and target the mainstream: people who know absolutely nothing about this technology.
Increasing access to these tools definitely allows more people to create niches and start new businesses. That’s a very productive outcome of this trend. However, it means that developers are forced to enter a race to win the mainstream’s heart while sacrificing their own bottom line and encroaching on each other’s specific territories.
For example, say you’re in a tribe of people living together and all adopt cannibalism after having run out of food. You eat your one and only doctor in the process. Maybe everybody will get to stuff their bellies full of money (or food in this case), but the long-term damage it does to the group’s ability to survive as a whole is insurmountable.
Avoiding Rampant Cannibalism Among Companies
Companies that have been established for a long time are now using the same tactics that were once used by the small fly-by-night hosts. In other words, unlimited services and steep discounts have become commonplace.
There are cost factors at play that many don’t consider. They are associated with general business expenses, from software licenses to support costs. These costs aren’t typically tied to a model that differentiates customers and the price they’re paying.
Let’s quickly play a numbers game. Say 1,000 customers are paying you $5 per month, and on top of that 50 customers are paying you $100 a month. Each of these customers brings you $5,000 every month for a total of $10,000 a month. However, you still have to hire three staff members at $2,000 a month each who will support your 1,000 customers. Those 1,000 customers are bringing a negative return, which your other customer base has to pick up the slack up for. Combining these numbers with the stress of supporting a larger, more demanding customer base will make you question whether being in business is really worth it. Out of fear, an industry filled with generalists is targeting customers who want specialists.
Establishing a Market for Your Business
A better solution is to establish a market for your company and own that market. Then charge a premium price to provide a better level of service for customers of that platform. Instead of competing on price and trying to differentiate by reputation or quality, find your market and own it.
Finding product-market fit is one thing, but ensuring your service or product is unique enough to be distinguishable from your competitors is another. If everybody in your industry copies each other’s features, you’ll find yourself in a pricing war with your competitors.
GeoCities failed to evolve and MySpace failed to own its market. Perhaps its time to ask yourself what it is that you are selling: a commodity or a service?