Why the first wave of successful products and entrepreneurs is overrated: The real winners come after
Lessons from Facebook, Google, and Ethereum
As an entrepreneur, I have witnessed firsthand the power of innovation and meritocracy in the tech industry. However, I have also noticed a recurring pattern in the market: the initial wave of successes is often dominated by those with the most distribution and privilege, but once that clears, the true talent and innovation emerge.
This phenomenon can be seen in various industries, not just in tech. It's a result of the inherent advantages that those with power and resources have over others. They have access to better education, connections, and funding, which makes it easier for them to enter the market and succeed. However, this initial success is often based on positioning rather than merit or innovation.
But as the market evolves, the barriers to entry become lower, and the competition becomes more intense. This is when the real talent and innovation can shine through. The second tier of entrepreneurs and products are often the ones that disrupt the market and create real value for customers.
How late entrants ended up becoming key players
Facebook was not the first social media platform, but it was the one that disrupted the market and dominated it. Google was not the first search engine, but it was the one that revolutionized search and advertising. Ethereum was not the first blockchain platform, but it was the one that introduced smart contracts and decentralized applications.
Before Facebook was launched in 2004, there were already several other social networking sites such as Friendster, MySpace, and LinkedIn that had millions of users.
Here are some of the key factors that contributed to Facebook's rise:
They started as a niche site for Harvard students, which gave it a sense of exclusivity and appeal. It then expanded gradually to other colleges, high schools, and eventually anyone with a valid email address. This strategy helped Facebook grow organically and virally through word-of-mouth and referrals.
User experience and innovation: it constantly added new features and improved its design to make it more user-friendly, engaging, and personalized. Some of the notable features that Facebook introduced include News Feed, Timeline, Like button, Messenger, Groups, Pages, Events, Marketplace, Stories (Snapchat did it first, but FB had better distribution ¯\_(ツ)_/¯), Facebook Live, etc. These features bolstered social interaction and content creation on the platform.
Acquisitions. Facebook acquired other popular apps and services that complemented its core business. Some of the major acquisitions that Facebook made include Instagram (a photo-sharing app), WhatsApp (a messaging app), Oculus (a virtual reality company), Parse (a mobile development platform), Onavo (a mobile analytics company), etc. These acquisitions helped Facebook diversify its revenue streams, expand its user base, leverage data insights, and stay ahead of competition.
Future readiness. Facebook invested heavily in artificial intelligence (AI) and machine learning (ML) to optimize its algorithms and deliver relevant content to users. AI and ML also enabled Facebook to provide better advertising solutions to marketers by targeting specific audiences based on their interests, behaviors, demographics, etc. Additionally, AI and ML helped Facebook improve its security and moderation systems by detecting fake accounts, spam, hate speech, misinformation, etc.
Furthermore, they leveraged their network effects, innovated constantly, acquired strategically, and utilized key niche technologies effectively.
Google is one of the most successful companies in the world, but it was not the first to market in many of its products and services. For example, Google Search, which was launched in 1998, had to compete with established search engines like Yahoo!, AltaVista, Lycos and Excite.
Rate of Innovation: They managed to build a monopoly by offering a faster, more accurate and more user-friendly search engine that used a unique algorithm called PageRank to rank web pages based on their relevance and popularity. Google also constantly innovated and improved its search features, such as adding image, video, news and map searches, as well as integrating their knowledge graph (which provides relationships between entities) and natural language understanding into their searches – this allowed used to get instant answers to questions instead of sifting through links to find it.
Exclusivity and Product Differentiation: Another example is Gmail, which was introduced in 2004 as an invitation-only service that offered 1 GB of free storage space at a time when most email providers only offered a few megabytes. Gmail quickly gained popularity for its large capacity, spam filtering, conversation view and integration with other Google services like Calendar and Drive. Gmail also leveraged Google's existing user base and network effects to attract more users and advertisers.
Utility Bundling: Google's strategy to dominate the market was to offer superior products and services that solved real problems for users and advertisers, while leveraging its core competencies in technology, data analysis and innovation. Google also acquired or partnered with other companies that complemented or enhanced its offerings, such as YouTube for video content, Android for mobile operating system, Waze for navigation and DoubleClick for digital advertising. By doing so, Google created a powerful ecosystem that made it hard for competitors to catch up or challenge its monopoly.
Ethereum
Ethereum is a remarkable example of how a blockchain platform can achieve a dominant position in the market without being the first mover. Ethereum was not the first platform to introduce smart contracts, which are self-executing agreements that run on code and can facilitate various decentralized applications (DApps). In fact, platforms like Bitcoin, NXT, Counterparty and BitShares had already implemented / had the potential to run some form of smart contract functionality before Ethereum was launched in 2015. However, Ethereum managed to surpass its predecessors and competitors by offering a more flexible, scalable and user-friendly platform that could support a wide range of DApps across different sectors and use cases.
Some of the factors that contributed to Ethereum's success include:
Protocol design that allows developers to create custom smart contracts using a Turing-complete programming language called Solidity, which is easier to learn and use than Bitcoin's scripting language.
A vibrant community that attracts more developers, users and investors to its ecosystem, creating a positive feedback loop that enhances its value and security. Ethereum has the largest developer community among blockchain platforms, with over 3000 DApps built on it as of this month.
Contributors: its constant innovation and improvement through various upgrades and forks that address technical challenges such as scalability, security and usability. Some of the major milestones in Ethereum's history include: Homestead (2016), Metropolis (2017-2018), Constantinople (2019), Istanbul (2019), Muir Glacier (2020), Berlin (2021), London (2021) and The Merge (2022).
A shared goal: its vision of becoming a "world computer" that can power a decentralized web (Web3) where users can interact with DApps without intermediaries or censorship. Ethereum aimed to achieve this goal by transitioning from a proof-of-work consensus mechanism to a proof-of-stake one, which will reduce its energy consumption and increase its throughput. It successfully pulled this off last year. This wouldn’t have been possible without the support of the ecosystem that came together to support it through the entire process.
Ethereum's journey from being an ambitious idea in Vitalik Buterin's whitepaper in 2013 to becoming the leading smart contract platform in 2023 is an inspiring story of innovation, collaboration and perseverance.
Takeaways
What can we learn from this? Here are some things to keep in mind for founders if you’re not the first to market:
Don't be discouraged if you're not part of the first wave of successes. Instead, focus on developing innovative solutions that solve real problems.
Be persistent and patient. It takes time for the market to mature, and there will be ups and downs along the way.
Build a strong network of supporters, advisors, and investors who believe in your vision and can help you navigate the market.
Embrace competition and use it as a motivation to improve your product and stay ahead of the curve.
Stay true to your values and principles. In the long run, customers and investors will appreciate authenticity and transparency.
Now, I know some may argue that this phenomenon is a result of systemic biases and injustices that favour those with power and privilege. While I agree that these factors play a role, I also believe that the market can be a force for change and progress. It's up to us as founders and entrepreneurs to use our skills and resources to create a more just and equitable world.
Tl;dr
The initial wave of successes in any market is often dominated by those with the most distribution and privilege, but this doesn't mean that meritocracy and innovation can't win in the end. By staying true to our values, being persistent and patient, and embracing competition, we can create real value for customers and disrupt the market.
It’s not the first-to-market that matters, but the last product users need and trust that truly does.
Thanks for reading. Feel free to reach out to me on Twitter (@menonOG) if you have thoughts on this post. My DMs are open.