July 23, 2013
A startup can compete against a larger website by gaining a foothold in a tiny sub-sector of a market and then branching out to offer similar services, according to two web strategists.
Web giants such as eBay, Amazon or Craigslist offer a broad range of services, but a startup can compete by focusing on a small part of that business, said Harry Weller, a general partner at the New Enterprise Associates venture capital firm. If a startup’s niche is small enough, it will not be worth it for the larger company to divert resources to compete, Weller explained.
“The big guy has to generalize and the smaller company does not, which breeds efficiency for the smaller company,” Weller said.
Building a following in a niche community also allows startups to pursue what Weller calls the “land-and-expand” strategy.
“The land-and-expand model is when you pick a beachhead market that is small relative to a large competitor’s market, and you expand by finding markets with some of the same needs that are relevant to the services you offer,” Weller said.
Savvy Wares is using this land-and-expand approach by planning a series of online classifieds, each tailored to a specific type of job to focus on the needs of those communities, said Ted Stein, the company’s lead developer. The company, based in Washington, DC, launched its first website Savvy Lessons in 2012, which is a jobs board for at-home music lessons. The company plans to follow it with Savvy Tutors, which will list offerings for at-home tutoring on a broader range of subjects, Stein said. The company is seeking funding to launch other sites including Savvy Babysitters and Savvy Yoga, he said.
Craigslist is a behemoth in the online market for jobs listings, but Stein said the Savvy Wares websites could compete using features including search filtering and background checks of people listing their services.
“Our filters for geography and skill set, combined with our background verification badges and ranking algorithm, allow for more relevant searches,” Stein said. “With funding, we believe that we can generate a broad and widely used set of websites.”
A website needs to develop credibility in a specific geographic area or industry to build a critical mass of users, said Peter Zollman, founder of the AIM Group consulting firm. AIM Group has worked with two-person tech startups but has also worked with larger corporations including Yahoo!, Microsoft, and Google.
Sharp web design and original website content such as photos and blogs directed at a specific community can help a startup stand out against a large competitor, said Zollman, one of the world’s top analysts of Craigslist. Despite its popularity, Craigslist has used the same bare-bones classified website format for years, so to stand out Savvy Lessons operates a blog written by its music teacher users, and has profiles for each user.
“You need to get people to engage with you. Target the passions like money or sports. Those passions could also be local issues depending on the region you are in,” Zollman said.
How to profit is a top challenge for startups along with gaining users, so charging for access is nearly impossible when competing with larger websites, Zollman said. Savvy Wares plans to sell the business management software that powers its websites but is also considering charging for premium features and upgrades, Stein said.
Guest author Tom Risen remembers LAN parties and custom-building computers before the rise of the smartphone. He started reporting on the tech stock market at the Medill School of Journalism, and has written about the tech industry for Government Executive, National Journal, Slate, Policy and Regulatory Report, and for newspapers in Maryland and California. He’s on Twitter @TomRisen.
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