The big news a couple of weeks ago was the launch of the Cuil search engine. After receiving its 15 minutes of fame, it seems to have been forgotten by everyone. Every once in a while, a new search engine pops up, threatens to oust Google from its throne, and then fades into obscurity.
The mistake made by these companies is that they think they can do to Google what Google did to AltaVista and the other search engines, namely, by creating a better search engine with more relevant results. The problem is that nobody today is unhappy with their search results, and so these startups are trying to fulfil a need which no one has. In addition to that, Google has also created a ton of services around their search tool that the upcoming competitor has to displace.
Google was able to topple its market leader because the existing products in the search engine space did not posses enough quality for end users. By bringing out a better product, they were able to grab those users. But once an adequate quality was reached, Google was able to erect other barriers to market entry through AdWords, AdSense, API’s, Integrated search and so on. Not only does a new company have to provide better or equal search results, it also has to replicate Google’s services to advertisers, programmers, webmasters, content creators and so on.
Many competitors focus only on the products of the market leader and ignore its ecosystem and infrastructure. For example, let’s say, you create a better desktop office product than Microsoft Office. That is not enough. You would need to break the established years-long relationships between Microsoft and its sales partners, or between Microsoft and its corporate customers. You would have to find a way to retrain the thousands of software developers and consultants who make a living off Microsoft Office.
Low barriers to market entry are one reason why the first vendor in a market does not always become the market leader. In a new market, the differences between products are very low. It is easy to develop a competing product. So, the winner is one who can bring in the most partners and users and build relationships that are difficult to break. Everything (pricing, publicity, placement, etc.) should work towards that.
This is fundamentally opposed to build a niche product. Niche market sectors operate at the fringes of the primary influence of the market leader, which does not or cannot address the needs of those customers. By definition, the strengths of the market leader have little appeal in a niche sector. This offers an opening to create a product that has a different strength than the leading product (example: Google Docs vs. Microsoft Office). Such a product can thrive and even grow if the market sector expands for some reason, say changing social, economic or technological environment.
But competing head-on-head with a market leader on its primary strength in an established, matured market is simply foolish. And Cuil is another company on that suicide mission.