Thursday, March 31, 2005
del.icio.us Vs del.irio.us
I've been watching this battle for the last week or so. If you don't know, del.irio.us is the perfect example of hypercommoditization - it's a total (open-source) clone of del.icio.us. A shameless clone - it rips off del.icio.us down to the font sizes, and adds a few bits of it's own.
Now, this is interesting for several reasons. First, because it's patently clear that most dot com 2.0s are conceptualizing strategy in the same way as dot com 1.0s: offer a platform for network fx, give it away, build the largest network fastest, and monetize by selling the platform or the user base to corporate or high-value segments.
The problem with this, of course, is that there are no entry or imitation barriers until it's too late - until your network is already the biggest. This is happening all over again - dot com 2.0s are failing to build entry or imitation barriers, and are getting hyperimitated - in every space, we see one innovator, and a huuuge wave of imitation (networking, tag servers...etc).
Another example today is EVDB - which is a corporate version of Upcoming/evnt/etc. Why don't dot com 2.0 players build imitation barriers? I think, to a large extent, because strategy is not really on the agenda - technology is.
Second, because it raises what to me is probably the most interesting question of 2005 - what will the free culture business model be? Now, for larger communities, the answers are straightforward - sell support or ancillary services, advertising, etc. But for individuals, the answers are much less clear? Why do people share? Why does peer-production work? The incentives, from a purely economics perspective, don't seem to exist.
For example, OhMyNews added a tip jar to compensate citizen journos 3 years later - and not through any massive outcry from the community, either. So maybe del.iciou.us vs del.irio.us can help us understand the dynamics of open-source vs closed - del.icio.us is closed and has just received a funding round, but del.irio.us is open-source and self-funded.
Can you expect to build a business around a product that has "no entry or imitation barriers"?
I'd think you'd need at least some barriers. A product that is difficult to reproduce. Intellectual property protection. High switching costs. A well-known brand. A network effect. Rapid innovation. Something.
Without barriers, the hordes of also-ran competitors will eliminate all profits. The only opportunity left would be for a hobby, not a business.
That was exactly my point - without imitation barriers, the durability of your advantage period is the time it takes others to imitate you.
Now, the catch is that sometimes you *can* sustain profits this way. It could be a long, long time for complex products which need to be reverse engineered (chips, fission reactors, operating systems) - complexity is an entry barrier in many industries. For a simple app like del.icio.us the advantage period without imitation/entry barriers is very short (as we've seen).
So you're right - imitators will erode profitability within the dot com 2.0 space, just like dot com 1.0 - because there are no natural imitation or entry barriers. That's why I said dot com 2.0 plays need to think a lil more strategically.