I published a mostly-baked thought regarding startups, products, and markets last week, largely driven by my prior experience as an early employee at Bronto Software. Bronto CEO Joe Colopy added some detailed email marketing industry insight in a lenghty comment.
In summary, new products and new markets are funny things. The first products to enter don't always win and neither do the products with the most whiz bangs. Those that win usually do so because they nailed a target segment right from the beginning and/or because they zigged/zagged from their original thesis to follow the market and stay alive. Financing certainly has some correlation to success, though I'm not going to do the homework necessary to figure out how it played out in the email market.
I took the time to think this through because I think that the social media marketing software market - the market we're trying to crack with Argyle Social - is following the same cycle:
The first market entrants are (correctly) targeting the top of the market. That's where the money is and also the most obvious application of the core sentiment/monitoring technologies that hit the market first. Not sure who the first entrants were, but my guess would be sentiment analysis vendors like Radian6, ScoutLabs, et al. and big, enterprise players like Vocus.
There are many apps in the market today and many of them are fairly similar. The aforementioned sentiment analysis providers (basically) inhale the Internet and/or the Twitter firehose, search for your brand and/or keywords, and then apply some natural language filters to determine sentiment. I have no idea what makes ScoutLabs different from Radian6 and I'm not entirely sure it matters. (Interestingly, I've talked to quite a few people that use these apps...and no one has had a glowing review to share. Pretty sure I know why.)
The first entrants are - for the most part - well funded and duking it out for the top of the market. Radian6, ScoutLabs, VisibleTechnologies, et al all appear to be thriving, but they're all targeting the same set of customers. Which is fine by me because it creates big, blue oceans in other parts of the market
Marketers don't know what they don't know. For the bottom 2/3 of the market, email marketing apps solved problems by introducing a mechanism that created a workflow, presented important information, and - in general - made it a little easier for them to feel like they were doing a good job. I think that social media marketers are in search of the same set of solutions. They feel like they're on to something what with all of the blogging and Twittering and Facebooking and whatnot...but they can't accurately measure the impact of their efforts because don't have a decent set of tools to tie it all together.
...and all of that is a big part of the thesis behind the Argyle Social initiative.
Having said that, there are some BIG uncertainties in the market:
- Speed. The Internet moves fast, but innovation around the social channel seems to be moving extra fast. We've got to get our app in the market and pronto, lest we risk getting scooped and thus lose a chance at picking up some quick momentum.
- Dependencies. It has taken me a while to get comfortable with the fact that we're building an app with critical dependencies on other web services. It compounds our risk and makes it a bit harder for us to carve out a defensible nugget. That said - all the cool kids are doing it.
- Value. Many might disagree, but I think that the freemium craze is fine for consumer apps, but nets out as a negative for the business market. Lots of free apps leaving money on the table drives down value for the entire market. And there are LOTS of free apps in the low/mid tier of the emerging social media marketing software market.
Note that I didn't list competitors. That's because competition is good.
And that's a post for another time.