7 things Digital Startups Need to Know - Differentiation

Is the Company Differentiated Enough to Become a Category Leader?

Due to the relative ease of starting a new digital company and the attraction of large pay-offs, there are likely to be a lot of new players in the digital space. The lack of an established player in the segment can be a big factor for new players to gain market share and become leaders in a new vertical. Eventually, one player will gain a dominant market share, leaving little space for others.

It makes sense to move into market spaces that have not directly seen competition from established players. For example, social networks have grown in leaps and bounds over the past decade with many players emerging, but ultimately failing. Facebook, the undisputed leader in the segment with more than 1.3 billion users has pushed out competitors, such as MySpace and Hi5. However, through that same time period, LinkedIn emerged.

LinkedIn positioned itself as a professional, rather than social, network and so avoided directly competing with Facebook. LinkedIn created tools that are functional in a professional networking setting rather than social tools and trivia, such as the chat interfaces and relationship status indicators that are seen on a Facebook page. For example, LinkedIn pages made available space for professional backgrounds and endorsements. It also offered premium access to paying recruiters and has over time morphed in to a digital age job bank.

Similarly, while YouTube dominates the landscape of online video, companies such as Vimeo and Vine have carved out certain niche market segments. Vimeo, which has around 100 million unique visitors, has branded itself as a premium alternative to YouTube by catering to professional filmmakers. It encourages users to pay for video content and is aggressively pursuing content providers to create exclusive on-demand premium content.

Vine targets a totally different market segment by being primarily a smartphone app carrying videos which are only around six seconds long. The company was acquired by Twitter for US$30 million within a few months of its inception in 2012. By late 2014, it had 100 million unique monthly viewers.

Report produced by: Asian Insights Office, DBS Group Research