A Change Of Environment: More Time (and Money) Needed

Tom Evslin makes the case that the Web 2.0 world has shifted, tectonically, and the days when startups could make it on a shoestring may be copming to an end:

[from Fractals of Change: Web 2.0 – Greater Initial Investments Required]

The first companies that figured out that you could launch a company on a shoestring because the cost of development was low and the blogosphere could be used for promotion were right and the good ones were handsomely rewarded. The problem is that “everyone” knows that now. There are a plethora of companies being started on a shoestring; there are a double plethora of fast imitators of each shoestring-launched company that begins to look successful. After all, just as Michael [Arrington] and Fred [Wilson] have pointed out, the price of entry is incredibly low.

Moreover, it is no longer easy to get mentioned on blogs that count (for launching new products) like Michael’s TechCrunch, Fred’s A VC, or Boing Boing. Nor is it easy to get dugg significantly on digg or get a high ranking on del.icio.us. Low startup costs mean too many contenders. New cottage industries plus associated scams have popped up to improve not only Google ranking but ranking on the social networking sites as well.

So, if you’re just now starting up, don’t get blinded by the successes of the first people to realize a platform could be built and operated on the cheap. You already missed that wave. Now, unless you are extraordinarily lucky or well-connected, you aren’t going to succeed in publicizing your new service and getting up to a critical mass of content or subscribers or both unless you raise or have enough money to create initial awareness or value. There is too much clutter from which you must emerge.

You may have to spend money creating a valuable aggregation of content in order to attract subscribers in sufficient numbers so that they add additional value to the content and create network effect for your startup. You may have to invest in advertising on blogs and other media; this isn’t nearly as effective as editorial mention but editorial mention is getting hard to come by.

Tom may be onto something. In a noisy market, it gets harder to stand out.

But the real issue is the lemming-like clustering of products. Who needs another clipping tool? Another "I like this product" list manager? Another social bookmarking solution? Another web-based multi-headed instant messaging proxy? Another start page app?

There is so much empty space out there. Where are the CRM tools? Where are the financial apps? Why do all the inventors cluster so tightly?

I am hoping for a migration out into the white space, where no apps are. That will lead to less noise, for sure.

In the meantime, Tom is right. But a return to PR in lieu of real value won't help in the long run. People are too smart to be hyped in the old, old ways. Brian Oberkirch is right when he says that it still comes down to getting the user experience right, and the bar will just get higher as more innovators crowd into the market:

[from time & talent]

The thing startups have to spend capital on is this: time. Nuance and pitch-perfect user experience are going to sort winners from losers. That takes time, community engagement, trial and error, a team.

If it takes more time to get it right, that will take more money. Simple.

Note that this is another echo of the "releasing too early" screed I have been harping on for the past few months. Companies that squander their first launch with less than the "social tipping point" -- the minimum level of social features that will engender viral uptake -- will simply fall from view. There's too much innovation, too many apps, too many releases, too much to waste people's time with a half-baked product. Get it right, or you will disappear into the dustbin of failed promise.

tags: brian+oberkirch, tom+evslin, releasing+too+early

Comments

[christopher carfi]

>Where are the CRM tools?

ahem. :-)

[Lars Plougmann]

Even in a crowded space, low startup costs is good news for entrepreneurs and consumers alike.
It is also good news for the B2B services, but there is not a lot of focus on that.
It is getting easier to challenge incumbents of all sorts and that is good news for all of us (except incumbents who fail to innovate).
And I agree with you that there is so much that has not been done yet. But good stuff is on its way.