Networks can still be beaten

The title of this post is taken from the wrap-up of  Jeff Bezos, Jack Ma, and The Quest to Kill eBay by Steve Yegge.

As I am now focusing on marketplace where network plays a major role in the business model, I’m particular interested in competition between marketplace, invasion of a emerging marketplace, and whether the network is a competitive advantage for the company (if it is, then first mover might have advantage).

I only follow listed companies such as PinDuoDuo (PDD.US) and Mercari  (4385.JP) where they probably have proven business model and built the network have built to some extent.

One of life lessons learned in Steve’s post:

Don’t try to beat a network by making a clone with improvements. It ain’t gonna work. There is too much gravitational inertia in the original network; nobody is incentivized to leave it.

Thoughts

[PDD.US]

If competitors is an incumbent with its own network, then it can leverage the network and launch a product with different value proposition.

[4385.JP]

Depending on the market size and capital required, the potential competitor probably can build a competing network(rather than beating) with an improved network.

[Where’s the moat?]

Except the switching cost resulting form network effect, it seems not many tools left for marketplace to tackle multihoming.

My current guess is that further lock-in might be created by  non-monetary investment from users – UGC / Community depending on the business model.

5 thoughts on “Networks can still be beaten

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