If you don’t like the musical suggestion in the headline, here’s an alternative “Another one bites the dust”. Yet again, we’re seeing a major organisation – this time AOL – making a massive mess of things online. And you think they’d know better, considering they started out as an online business. In case you haven’t caught the news today, AOL has announced it plans to ditch Bebo, the social network it bought for a sizeable $850m two years ago. In that time, Facebook has more than doubled its number of users, yet Bebo has lost three quarters of a million people.
It’s a familiar tale. Remember Friends Reunited? That was arguably the world’s first significant social network. ITV bought it for £175m in 2005, saw its number of users fall dramatically and sold the business four years later at a loss of £150m, having raised only £25m for it. The irony that the business was bought by The Beano’s publishing company is not lost on many.
In the Friends Reunited debacle, the mistake was to charge people when other similar services, like Facebook were free. The mistake by AOL was to make the minimum age for the use of Bebo 13, when it was the social networking site of choice for those in primary schools.
But those are not the real errors. In both instances these businesses failed to dominate their market. Online, whichever marketplace you choose, you simply have to dominate. Consider the search advertising market – who dominates? Yes, Google, by a country mile. Think about your own marketplace, one company probably gets the top search engine rank for a wide range of terms and simply dominates your sector.
Prior to the Internet, there was room for several players in a market. Nowadays – partly due to the way the web works and partly due to lower attention spans of web users – there is only space for one dominant player. In social networking that’s Facebook, in search it’s Google and in professional networking it is LinkedIn. Who dominates your sector?
Even if you take a narrow, tiny sector which appeals only to a small number of people, the chances are a single organisation will dominate the search results and all the clicks they get. In each sector something like 95% of all the traffic and resulting attention will go to just one company. So, if you are involved in the manufacture of blue widgets with pinks stripes, one company will dominate online – even if half a dozen businesses have happily co-existed in the offline world for several years.
The lesson that the AOL sale teaches us is the need to dominate a marketplace. Some people might call it “narrowing your niche”, but whatever you call it you need to be in charge of your market. That means offline branding, search engine dominance and social network dominance. If you are not Number 1 in all of these arenas in your own specific marketplace, then you could go the same way as Bebo or Friends Reunited.
And if you say there’s too much competition in your sector to easily be the dominant player, it suggests your marketplace is not narrow enough. Bebo dominated the market for child social networking then moved itself into a wider market, thus losing its narrow, targeted appeal. It was swayed by the bright lights of the Facebook position. If Bebo had narrowed its niche further, making it ONLY for children aged, say, 5 – 11, it would be the dominant player in its marketplace.
The world of the Internet requires your business to be narrowly focused and then targeted specifically. If you do that and take steps to dominate your position, you will do well. The only implication is that you need to rethink your entire business strategy. Instead of having one business that aims at one wide group of people, the online world needs you to have several businesses, all narrowly targeted. If you then dominate each of those niches, you will make more money than trying to aim big – and thereby avoiding dominance.