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Own Your Category or Die

I'm starting to think that to succeed on the web you have to create new categories, not compete in existing ones. Once a company owns its category, it is really, really hard to unseat them. Google, eBay, Twitter, PayPal, Amazon - these are all companies that not only the market leader, but own their categories. And when I say own, I mean own- despite efforts of others, there's no real competition for any of them.

So why is that? One of the reasons is that two of the traditional ways of stealing market share - price competition and convenience - don't work online. With most things on the web being free, price competition is really a non-factor. For example, you can't undercut Google by selling search results cheaper. You can't steal market share from Craigslist by serving up free classifieds less expensively.

As for convenience, since everything on the web is only a click away making a site or service more accessible is difficult. If there is any convenience competition on the web its in the SEO/ SEM industry. Their job is to make your site more easily accessible from the #1 traffic aggregator. But, as I've said before, you can't own a category from SEO/ SEM alone.

So if you can't win by competing on price or convenience, how do you win? You have to build new categories. You can't beat eBay in auctions - they own that. But if your a smart company like StubHub, you create a new category - a ticket market with a guarantee behind it. If you want to compete with MySpace, you can't be a social network focused on music. But you can be Facebook, a social network focused on user privacy. Similar technology and functionality, but a new category.

So what if you want to beat Twitter? Or, gasp, Google? Well, it won't be by competing on their turf. You need to innovate on the existing technology and create new categories. The old ones are taken and there's no room for a number 2. The bad news is that if you don't, you'll lose. But if you do, you'll win big.

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Comments (4)

Nik:

This is great. I had gone through this presentation earlier today- http://www.slideshare.net/coolstuff/the-brand-gap

and had thought about your posts on branding and the problem with yahoo's positioning...

Jens:

Great post.

I have one additional comment. Sometimes, the guys that 'own' a particular category are not very good at what they do. There may be even a very fragmented market with lots of mediocre players.

This gives an opportunity to swipe the plate clean and then 'own' this category. But this only works if you can be significantly better than the incumbents. Very hard to do.

One example that comes to mind is kayak.com for airline travel search (vs. Opodo, lastminute, cheaptickets, etc). Another would be Firefox (vs. Internet Explorer). I am sure there are more examples.

So, either the category doesn't exist or it sucks. That is where the opportunities are.

I generally agree with your main point, but I don't think things are quite so black & white. MySpace and Facebook differ more in style & emphasis than any deep-down category, attracting different demographics.

Similarly twitter-like identi.ca has a healthy following, even if it is a fraction of twitter's - but seems to have a much high proportion of geek users. There'll always be room for something more vertical within a given category (you can buy anything on eBay, but Amazon do books and Etsy does handmade).

...and Facebook being privacy-oriented? I'm really not sure about that :)

Lisa:

I agree with this article, and I think it cannot be repeated and re-emphasized enough. Look at Google taking over from Yahoo years ago, it was because Yahoo was doing a poor job of identifying 'relevance' the key factor in search engines. I think, though, as other commentators here have said, there is room when someone stinks. I would, however, add one part to this article that can defeat the big guys (only if they stink) and that is functionality/process. For me, this is the BIGGEST factor in determining who stays in the game or now. You must be constantly innovating and improving your process. Examples of ones who have done this? Wikipedia - improvement is an inherent function, I love it. Example of ones who have not (thus creating too many players without a clear winner) Expedia, Travelocity, CheapOair etc...

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