Thriving Competition From Market And Product Innovations
Tech businesses are thriving in today’s ever-competitive market, with innovation at an all-time high. Startups and industry leaders are growing, refining, and expanding their businesses in innovative ways. Experts agree tech competition is strong as new entrants push more established companies in new markets and with new products and services. For example:
— Yelp is thriving by focusing on local businesses.
— Slack is thriving by offering free services for business communication.
— TikTok is thriving by appealing to Gen Z, becoming the next frontier in marketing.
Experts agree tech competition is strong as new entrants push more established companies in new markets and with new products.
ScOp Venture Capital Managing Partner Kevin O’Connor writes that competition in tech is fierce, and leading tech services are successful because they create products that consumers value. “Though many of their products are provided free of charge, tech titans now face political attack for their success. Yet if you don’t like their products, the competition is only a click away. There’s no reason internet companies can’t be out-competed in the marketplace (remember Alta Vista, MySpace and Pets.com?). Critics say Google and Facebook’s dominance of digital advertising is evidence of illegal market manipulation. A simpler explanation is that their products work very well.”
McKinsey Global Institute analysis finds that superstar firms continue to be displaced by upstarts. “Superstar firms continue to be displaced from the top 10 percent and the top 1 percent. Indeed, some firms have risen from the bottom 10 percent to higher deciles—a few all the way to the top 10 percent. In each of the past two decades (corresponding to a business cycle), nearly 50 percent of all superstar firms fell out of the top 10 percent during the business cycle, and when they fell, 40 percent fell to the bottom 10 percent. The top 1 percent is also contestable, with two-thirds being new entrants to this top rank in the latest cycle. There is also some variation by sector and geography. Superstar firms from emerging economies, for instance, have a higher churn rate of 60 percent compared to 40 percent for firms from developed economies.”
Georgetown scholar Larry Downes argues network effects are short-term and are vulnerable to next-generation innovation. “Network effects may create temporary market leverage for a platform company at the top of the new adoption curve, but the period during which they can exploit it gets shorter all the time. Even wildly successful technology start-ups have fallen victim to a surprising drop-off in user attention and a failure to prepare in time with a next-generation innovation.”
Yelp is thriving by focusing on local businesses.
Yelp is seeing accelerating growth in today’s market—that is only set to expand throughout 2020. Last year, Yelp saw “higher revenue growth and [also] higher profitability,” as noted by CEO Jeremy Stoppelman. Stoppelman further highlighted that “in the first half [of 2019] we saw 5% growth accelerating to 10% growth in the second half. So that we think that we’re well on our way to an acceleration—continued acceleration in 2020.”
Yelp has grown to 100 million monthly active users. “And I guess backing up to the fact that we have 10% of our leads monetized, we feel like we have plenty of inventory and opportunity with the traffic that’s on the site today. And Comscore has us at about 100 million monthly users right now.”
According to Tom Foran, Yelp’s VP of National Sales, the business search company is thriving by targeting local markets. “We are very competitive. Whenever companies have a location presence—like restaurant brands, retailers, home and local services—we do really well. We are invariably in the top quartile of third-party attribution results. But Yelp has traditionally been so synonymous with local, we are having many conversations with large agencies and customers for the first time. I think we’ve found our voice in enterprise. After sunsetting the display business, we’ve figured out our playbook and why we matter.”
Foran also said Yelp saw 22% growth in 2018 and is positioned strongly to grow even more. “On the sales side, I feel we can fight the fair fight [with Google] and compete on our merits…. We grew 22% from Q1 2018 to Q1 2019. As an example, we’ve identified 250 strategic accounts we’re really focused on and have entered in 60 of them. We’re seeing growth, and we have years of runway ahead of us in terms of enterprise opportunity. We hold our own performance-wise.”
Slack is thriving by offering free services for business communication.
Slack’s growth is owed to offering a free service that businesses find useful. “Slack has an actually-useful free service. The key to growth is to remove as much friction as possible, in both product design and economics. Many groups (including Quartz) are happily communicating on Slack for free.”
TikTok is thriving by appealing to Gen Z, becoming the next frontier in marketing.
TikTok is one of the world’s most valuable startups with over one billion users, according to Financial Times. “TikTok is owned by ByteDance, a Beijing-based tech company valued by SoftBank last year at $75bn—making it one of the world’s most valuable start-ups. It claims to have more than 1bn active users, which would make it more popular than Twitter and Snapchat combined, but trailing Facebook. Many of those billion users are young people hoping to parlay the app’s burgeoning popularity into their own. Isaac Quiles is one of these people. At Columbia, he has set out to turn his hobby—filming silly videos in the hopes of going viral—into a campuswide organisation and charity fundraiser.”
TikTok is the “next frontier” for digital advertising and marketing. “And TikTok’s massive engagement numbers, with view counts often numbering in the millions, highlights why the social platform is appealing to marketers. For example, MAC Cosmetics worked with three TikTok influencers in September 2019 for a hashtag challenge ad campaign called #YouOwnIt. Over the six-day campaign, a total of 635,000 videos were created, with an approximate total of 1.6 billion video views.”
TikTok’s growth is attributed to its appeal to Gen Z creators. “TikTok appeals to Gen Z , according to experts, because of the way it’s been designed from the very beginning; it emphasizes short-form video content, it’s easy to use and it’s even easier to go viral on the app than other more established social media platforms. It also feeds in perfectly to Gen Z’s desire for entrepreneurship and being a creator.”