jump to navigation

Having the best product; neither necessary nor sufficient January 23, 2007

Posted by jeremyliew in Consumer internet, Digital Media, startups, video, viral, viral marketing, web 2.0, widgets.

I’ve been thinking a bit more about how consumers adopt “new” products online recently, in part because of a couple of recent posts I wrote in reaction to rumors of a Safari browser for Windows and questions on the value of widgets. What struck me is that very often, the “best” products don’t win majority market share. Many claim that Firefox is a “better browser” than IE, and I’ve lost count of the number of times I saw a pitch from a video sharing site last year that claimed to be “feature for feature, far superior to Youtube“. Yet IE and Youtube dominate their markets. And the same is true in so many categories.

Cynics might attribute this to bad luck or my favorite, user stupidity (because its always good to have contempt for your customers), but often there is a pattern at work. In a new consumer market, the winners win on distribution.

In a new consumer technology market, users don’t yet recognize that the category exists. They don’t recognize that they have a problem, so they are not going out looking for a solution. They’re not issuing RFPs, they aren’t even compiling shortlists of possible vendors. They are stumbling on solutions by accident. And that is why distribution is key in a new market.

Lets take an example; online travel. The early market share winner was Travelocity/Preview Travel. They won that early market share on the back of distribution deals with Yahoo! and AOL. In the late 90s, most internet users didn’t even realize that they could book travel online. But they were actively using portals, and through the “travel channel” on the big portals, they stumbled across the online travel agencies and started booking online.

Google is another example. It was a “better search” product when it launched in 1998, acknowledged among the Digerati. But it wasn’t until it struck its distribution deals with Yahoo! in 2000 and then AOL in 2002 that it really started to get used widely. Before users were exposed to Google through their portals, they didn’t know that better search existed.

Product is of course important. Your product can’t be actively bad. If Travelocity’s booking engine didn’t work, or if Google’s PageRank didn’t produce more relevant results at that time, then users would not have come back. But they needed distribution to be found in the first place.

Updating to 2007, the same principles apply. But whereas portals were the only path to distribution in Web 1.0, today social networks offer another way to reach internet users. But now the “discovery” process is a little different. Take embedded online video. A year ago, users didn’t understand that this was a category, they didn’t realize that they wanted to embed videos in their profile pages. But when they saw an embedded video on a friends profile, they could say “Hmm, I want one of those”, click through and get one for themselves. Now the category is established in users’ minds, and brands have been established. But earlier, “distribution” was what drove growth.

Social networks offer a different challenge than portals. Whereas you could get distribution by doing a single business development deal with a portal, on social networks, you need to convince each individual user that you’re worthy enough to keep. But as you get more penetrated into the community, a new user is more likely to run into you and try you. So scale matters and it is a virtuous circle – the more share you get the more likely a new user is to stumble on you as a provider. Going up against an “incumbent”, even with a “better” product, can get very hard. Distribution and adoption end up meaning almost the same thing. This is why Rockyou and Slide are the number one and number two fastest growing widget makers in social networks, and why VCs pay so much attention to “traction” and so little to the fact that its easy to replicate the features of these widgets.

The other web 2.0 distribution mechanism is virality. Users inviting users is the other way that a user can get exposed to a new product – solving a problem that they didn’t even know that they had. Ravi has posted on this a couple of times so I won’t go into it again.

So the next time you build an absolute killer product in a new consumer category, don’t stop there. Unless you’ve got a plan to get new users exposed to your new product, your efforts may be for naught.


1. Robert Young - January 23, 2007

Great post, Jeremy. The overall point you make here should be pounded into every entrepreneurs’ brains.

2. joe - January 23, 2007

Guy Kawasaki made it a point to seperate distribution from virality. But it seems in the new consumer web, especially involving social networks, they are one and the same. Or better stated, virality is the single most important distribution mechanism… certainly in the case of widgets. Thanks for the excellent post.

3. Matthew T - January 24, 2007

Excellent post Jeremy.

To your post, I would add one other value “add” to traction or scale.

If you are running your products on consumer behavior metrics (as you should) then larger scale (rather than feature sets) allows you to reach statistically significant data to optimize your product. For example, if I am getting 10 users a day then the fact that one of them does “something” is not statistically significant. However, if I am getting 10,000 users a day and 1,000 of them are doing something, that’s significant.

If I have no scale and I am getting 10 users a day, then it would take me 1,000 days to reach the same conclusion than if I had 10,000 users a day.

Thus I can actually “statistically” move faster and more efficiently with more scale.

4. Product & Place « Random Thoughts - Cricket, Music, Internet … - January 24, 2007

[…] & Place Nice article on how “product” alone is not enough to ensure success – you need distribution […]

5. andre taliercio - January 25, 2007

I agree with you Matthew T because at the end you are really after the 1,000 members (in this example). Running a social network site, I need to build quickly a solid base with members who will enjoy the service and migh pay for it when the time comes.To get this base I need a lot of traction.

6. Pran Kurup - January 25, 2007

Excellent article. However, there was no mention of pricing! “Give the product for free, drive users/traffic and then figure out how to monetize” — this was true of the dotcomm days.

With the present-day drive towards adoption, discovery, distribution and the like (all of which are affected by pricing), what is the best way to price products?

Many of the recent Web 2.0 exits have all been free products/services. Sounds like free is the way to go! Dotcom days are here again?

7. A play about success in consumer technology, in three acts « Lightspeed Venture Partners Blog - February 6, 2007

[…] networks, user generated content, Consumer internet, Lead gen. trackback I’ve previously posted on the importance of distribution during the initial phase of a startups life. To be more accurate, […]

8. Five Good Minutes With Jeremy Liew | Scoreboard Media Group - February 20, 2007

[…] posted a little about this on the Lightspeed […]

9. The pros and cons of “Stealth mode” « Lightspeed Venture Partners Blog - February 22, 2007

[…] development can be difficult. As I’ve posted about in the past, in the early stages of a new consumer technology category, distribution is […]

10. "High Concept" startups « Lightspeed Venture Partners Blog - March 26, 2007

[…] often the “best” product is not the winner. Sites with early adoption – whether due to Distribution, Virality or just plain luck, can end up pulling away from the others. In all startups, execution […]

11. Implications of “Convenience Beats Quality” « Lightspeed Venture Partners Blog - June 2, 2008

[…] The best product is neither necessary nor sufficient 2. Distribution can be more important than functionality 3. Lightweight interactions beat more […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: