Consider even the highly lauded Facebook. It leveraged its eye-popping growth rate to attract investors to fund investments in capabilities that attracted more and more users, which in turn attracted more investors, and, finally, some advertising revenue. Facebook has such a large base of users that it can help advertisers seek tightly focused customer segments. But now that Facebook has provided a blueprint, could a new competitor focus on a specific segment and steal those advertising dollars? Unlike the loyal customers of a Zappos or a Quidsi, the mass market can be quite fickle. As a reminder, Facebook CEO Mark Zuckerberg, who was named Time’s Person of the Year for 2010, might want to think about past magazine covers featuring the CEOs of what Time described as famous Web flameouts: Friendster, Napster, and Pets.com. Groupon founder Andrew Mason reportedly keeps these on display alongside his own Forbes cover in his Chicago headquarters, as a constant reminder that competitive advantage can be fleeting and that scale isn’t everything.
For most aspiring Internet entrepreneurs in today’s online environment, the most likely paths to success will start with focus, build on success, and then — and only then — lead to scale.
Author’s Note: A host of collaborators have helped discern the evolving trends on the Internet, including former Booz & Company colleagues Barrie Berg, Silas Byrne, Chris Capers, Anne Chung, Anand Devendran, David Evans, Pat Houston, Angela Huang, Brian Long, David Torres, and Martha Turner. More recently, academic collaborators Ken Boyer, Brent Goldfarb, David Kirsch, Eve Rosenzweig, Aleda Roth, Johnny Rungtusanatham, and, especially, Elliot Rabinovich have helped shape my thinking.
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- Tim Laseter holds teaching appointments at an evolving mix of leading business schools, including the Darden School at the University of Virginia and the Tuck School at Dartmouth College. He is the author or coauthor of four books, including the forthcoming Internet Retail Operations (with Elliot Rabinovich; Taylor & Francis, 2011). Formerly a partner with Booz & Company, he has more than 25 years of experience in operations strategy.