We hear the term first mover advantage very often. This refers to firms that bring something new to the market and enjoy advantages and success due to it. Since their idea/product/service is the only one existing in the market, they tend to capitalize on it. However, we can see some recent examples as to how being a first mover is secondary to being innovative. So, what exactly is the first-mover advantage? Is it even necessary? We will discuss the topic in detail in this article.
What is the first-mover advantage?
A first-mover or first to market advantage is “a firm’s ability to be better off than its competitors as a result of being first to market in a new product category”. These first movers are innovative thinkers who have identified untapped markets and potential. Hence, They take advantage of these untapped markets by monopolizing them and earn high initial profits. These high profits, and other benefits like exponential growth, come under the first-mover advantage. However, this advantage must be durable in order for the company to remain at the top. For example, Apple restructured their company after successful initial years because Microsoft and Intel disrupted their market.
Read: 6 Small Businesses to start in 2020
First Mover advantage Examples
There are some famous first movers in the current global market. Amazon, for instance, was founded by Jeff Bezos as the first-ever online book store. The company had the largest database of books, delivering all across the globe. Amazon capitalized on this first-mover advantage and grew its business beyond just books. They are currently the biggest online marketplace in the world, selling a variety of goods and services across the globe.
Another first mover was Airbnb. Airbnb took the hospitality industry by storm, coming up with the idea of renting out private rooms to people who could not afford hotels. Brian Chesky, Joe Gebbia, and Nathan Blecharczyk founded the company in 2008. Since its inception, Airbnb has become the world’s largest online platform for short-term rental services around the world. However, the recent Coronavirus pandemic has hit the travel industry hard. Hence, It has forced the company to fire almost 25% of its workforce.
Read: The Next Billion-Dollar Companies
Why it might not be necessary
While first movers tend to enjoy initial success, many of them fail to sustain it. Continuous innovation is what they fail to achieve. New, more innovate companies come into the market, disrupting their advantage. These companies have not found a new market, but new ways to improve a current one. These market disruptors bust the first mover myth, making it a half-truth. Many of them have overtaken their fellow first movers in their respective markets. Here are some examples:
Read: Market Disruptors and Innovation: A closer look
Skype and Zoom
The video calling platform Skype was founded in 2003. It gained incredible momentum as a first mover in the video chat market and became the go-to app for many businesses and personnel for the number of years. Many other platforms came, but none were able to knock Skype off its perch. 2020 would speak a different story, however. Zoom, the video conferencing app, went viral as the coronavirus pandemic hit. Using a customer-centric approach, Zoom’s founder and CEO Eric Yuan left his position at WebEx and founded the company in 2013. He worked on his idea for two years, focusing on a video-first approach. As the pandemic hit, Zoom’s popularity went through the roof, along with its stock. Zoom is now considered the best video-conferencing application in the market.
Vine and Tiktok
Vine was an American short-form video hosting service founded in 2012 where users shared seven second-long, looping video clips. An innovative idea for users to create short video content, Vine became extremely popular. However, the user experience on the app itself was not great, and it was eventually discontinued in 2016. In came Tiktok, another similar video-making application where people used background songs and dialogue to create their content. It is used to create short dance, lip-sync, comedy and talent videos. The application is going viral currently, with millions of users worldwide, increasing in popularity day by day.
Myspace and Facebook
Myspace was found in 2004 and was the first big social media networking website. From 2005 to 2008, it had nearly 100 million users. Facebook was founded in 2003 by Mark Zuckerberg, Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, and Chris Hughes. In 2008, it overtook Myspace’s place as the site with the most unique visitors worldwide. Currently, Facebook is considered to be the biggest social media website in the world, with more than 2 billion users. With its innovative approach to networking, Facebook was able to crush Myspace and continued to grow. The company has continued to expand, recently launching its own e-commerce platform, Facebook Shops.
Read: Facebook Shops: Business storefronts or Groundwork for libra?
Let us know your thoughts regarding the first mover advantage in the comments below!
Interesting read! I think you’re right. First mover advantage is definitely advantageous but not necessary. Continuous innvovation is what keeps a company in business. A perfect example is Kodak which failed to incorporate new tenchnology.
Kodak is a great example, Mustafa! They failed to innovate and paid the price.