Can anyone explain more what he means by that? How can something that is a cash flow hit for a BigCo not be a cash flow hit for anyone else?
Southwest undercut united and American by avoiding business and first class, flying only one model of plane (737), which lowered maintenance costs and allowed easier substitution of planes among flights. They skipped the hub and spoke model and flew out of peripheral airports that were cheaper, and boarded like buses with no reserved seats to shorten the idle time a the gate, etc. no long flights meant no meal service. There was no possible way for United and American to match them on price. They were afraid to adopt any of these changes because it might tarnish their brand. They were too focused on competing with each other.
Dell offered lower costs than their competitors by charging up front for the computer before buying the parts (which were steadily falling in price). The competition were stuck with a channel model where they shipped finished computers to channel partners for stocking in inventory, so they not only had to buy parts far in advance but had to give a cut to channel partners and retailers, making their prices higher and profit lower.
Netscape had a dozen competitors to their browser. Netscspe offered free downloads to anyone, and with a wink asked for a licensing fee. No individuals paid it, but corporations did because they wanted to be in legal compliance. Best of both worlds (free for individuals and paid by corporations, but only after achieving critical mass within the corporation). They crushed their competitors with this model, who were charging license fees to all customers from the beginning, as competitors didnt get the benefit of rogue employee groundswell to achieve critical mass in corporations.
Hilariously, Microsoft in turn crushed Netscspe by goong a step further, making Internet Exploror completely free, no wink needed. Netscspe browser revenue dried up as corporations stopped paying for Netscape because they already had a free license to ie.
This was funny to me, as it led to all sorts of crybaby behavior by Netscape screaming "antitrust!", when all Microsoft did was tweak the strategy used by Netscape themselves to crush the others.
All of these cases are "strategy", which is defined by Michael Porter as the way that you are different from your competitors. Ideally, in a way they cannot copy. Notice how a strategy allows you to avoid competing, because you're playing a different game altogether.
Downloading Netscape back in the day wasn't the same as downloading Chrome or Firefox today. We're talking about 1997-8, when most people had 56k modems at best.
Apple's position with respect to Safari is nothing like Microsoft's position at that time. For starters, Apple doesn't even approach a monopoly in the desktop PC market. And Chrome and Firefox got big in a different era, years after Netscape was buried.
You seem greatly concerned to say that Netscape was "whining" and "screaming" and that it wouldn't "make sense" for Microsoft to have done otherwise. I am only concerned with the accuracy of the account of how IE got popular. If that impedes your Netscape bashing, that is only incidental to me and I don't even understand why you would still have any kind of interest in the subject given how long Netscape has been buried.
I'm sure that strategies exist on any platform. Zynga doesn't seem worried that Facebook will copy its games (even if they do hate paying the platform tax). Many products are pretty safe from Facebook. For example, build an app for dentists, or personal trainers, or pregnant women.
The risk is not very hard to assess. It's pretty binary per startup opportunity. Do the relevant incumbents' revenue models, distribution models, or inherent cultural limitations prevent them from competing with you. @paulsutter covered the first two well early in this discussion. For the last, Apple has great difficulty with social, Facebook hasn't figured out Touch, Google is excessively focused on those two competitors, etc.
Please also see these two comments: http://news.ycombinator.com/item?id=4336783 http://rafer.net/post/28638883246/mark-i-know-for-a-fact-tha...,
This was great from a user perspective (puts a picture with an email so you recognize that this is 'Bill' who you met at the hackerspace even though his email is cypherdog26@crytomesh.org).
However it was NOT so great for Gmail:
1. Rapportive overwrote the section of gmail where they display ads.
2. It further entrenched Google's social competitors.
There is no way that Google was going to launch a set of Rapportive equivalent features in Gmail. However, Rapportive was beloved by users and exited to LinkedIn.
Facebook and Instagram was a perfect example. Facebook has money, time, and resources to build an Instagram competitor. But they didn't, because they still don't know how to monetize their mobile traffic (which should answer the question, "Why is Facebook's mobile app so awful?") They tried last minute to build Facebook camera, and when that had no traction because Instagram had already captured that market they had to cut their losses and buy it. My guess is Instagram realized that Facebook was basically forced to buy them and made them pay for it ($1B).
So I work on a startup in the news/journalism industry. If we're to follow the argument (which I believe is spot on), our goal is to build something that the New York Times or Washington Post wouldn't dare build, because it would destroy the revenue from their newspaper sales (yes, we have to compete against the likes of the Huffington Post too, but it's easier to illustrate it against the background of business models that haven't changed since the 1950's).
What Steve Jobs always preached was true - if you're not willing to cannibalize yourself, someone else will cannibalize you. As a startup, one strategy is to find those companies not willing to cannibalize themselves and help them out a little bit. But in doing so you run a risk; if you don't generate traction quickly enough and they see that it's inevitable, they'll just build it on their own and leave you hanging out to dry.
If @daltonc's app.net doesn't massively undercut FB's App Center revenue plan (or overwhelm it's distribution plan) somehow, what's the point?
I think your cannibalization concept is brilliant, but I don't think app.net is completely vulnerable to it. Caldwell's made it clear that he's not trying to find success of Twitter and FB's magnitude, that sustainable profitability is more important for this venture than unbounded growth and huge winnings, and he's not trying to steal Twitter's customers, whatever that would mean. But unless Twitter becomes wildly profitable I don't see them giving away ad-free unrestricted API access just to eliminate a small gadfly.
I think your concept has a lot of merit, but I'm not sure it applies in this case.
I mentioned elsewhere that, personal opinion only, of course, that this expectation is the sign of bad mindedness. Think of the logical implications of this point.
And, when I don't like the tone of a meeting, I politely leave. Facebook's offices are physically difficult to enter, not leave.
a) dev builds software on the platform that doesn't disrupt the platforms economics, distribution, or organizational limitations. b) dev builds software on the platform that does disrupt the platforms economics, distribution, or organizational limitations.
You seem to be saying that if he had done a 'proper job' he would have pursued strategy b. But surely that is precisely the case where you can expect to be bullied. It is strategy a. where you develop software that does none of those things, but adds value to the platform by adding value to the users of the platform where you are least likely to be bullied. In these circumstances you are no threat and you are complementing the platform.
Strategy a can only be pursued when you are not dependent on the platform and hence are much harder to bully.