Common Challenge

Bloggers, especially A-list ones like to trash services whenever a new and effective competitor apears. This is not a new thing by any means – when TV was announced radio was dead. When video was announced – cinema was dead. When computers were announced – books and paper were dead. But they’re all still walking. From economical point of view, a consumer here has a choice of two free products that serve a similar need (and are thus substitutes). Since the transaction cost (of for instance switching or simultaneous use) are marginal – consumer has no other incentive to choose one product over another than the utility she or he gets. On the other hand, with no usage cost consumer has absolutely no incentive to abandon either product completely. Thus one product must produce ultimately higher utility than it’s substitute to be a real winner. Which is usually the case when technological leap happens (CD to MP3 for instance).

So when someone is writing that Twitter will die because Friendfeed is here, or comments are dead because Seesmic (and Friendfeed) is here, or Myspace is dead because Facebook is here – they slept on history classes. The truth is – if you have two competing services, both of which are free (vide Radio vs TV) people will either:

1. split their attention
2. split into target groups

If #1 happens, you have to make sure to be able to give them as much access to your service as possible (so their possible attention span is longest). For comments on blog, that means they should be pulled back from Friendfeed. For Friendfeed it means posting a comment on blog and on Friendfeed should be simultaneous.

If #2 happens, you have to choose your side. That’s what  Facebook vs Myspace is all about: reality vs dreams. Someone once wrote that on FB people are who they are while on MS they show who they want to be. In other words it’s communication vs entartainment. Sometimes people get confused and that’s what happens.

In other words – it’s very unlikely that a free product would have no customers. Of course, it doesn’t mean it will survive because of business issues (such as lack of sufficient revenue), but it’s not beacuse all users will abandon it.

What it means for you? Don’t worry if you get some competition in your (free) space, even if it’s big. Focus on the user, focus on utility, and grab your market share.

Photo credit goes to: http://flickr.com/photos/eelssej_/