How New User Acquisition Channels Drive Change
The emergence of new user acquisition channels often reshapes the landscape of the consumer internet. These channels create opportunities for startups and force established companies to adapt—or risk losing their competitive edge. Understanding the dynamics of these changes can help businesses thrive in a constantly evolving ecosystem.
The Evolution of Consumer Internet
New distribution channels, such as search (PPC & SEO), Facebook, and mobile, have repeatedly redefined the way companies grow. With each channel comes a predictable cycle of opportunities and challenges that disrupt the status quo.
Why Do New Channels Lead to New Companies?
1. Cheaper Acquisition: New channels initially offer lower customer acquisition costs (CAC), making it easier for startups to compete with established players.
2. Product Distribution Fit: Products need to align with the unique features of new channels. Established companies often struggle to adapt existing products to new channels, leaving room for startups to create tailored solutions.
Vertical and Channel Alignment
Not every vertical fits every channel. For example, email invites didn’t revolutionize online dating because users were unlikely to share their participation in such a service. Successful channel adoption depends on how well the vertical aligns with the channel’s characteristics.
The Fast Follower Advantage
While first movers exploit a new channel’s potential, fast followers often become long-term winners by refining the product and improving user retention.
Cycle of Evolution in New Channels:
1. First Movers (Exploitative): Rapid user acquisition but shallow user retention.
2. Fast Followers (Sustainable): Better user retention and monetization, leading to long-term dominance.
3. Niche and International Players: Focused on specific audiences or regions, finding advantages in deeper layers of the marketing funnel.
Shifts to Niche and International Audiences
When competition for the mass market becomes saturated, companies pivot to:
1. Niche Audiences: Companies focus on specific user segments, tailoring experiences for higher retention and monetization.
2. International Markets: Companies expand into less competitive regions, leveraging local expertise.
Accelerating Cycle Time
The speed of these cycles is increasing due to several factors:
1. Lower Costs: Building and launching products is faster and cheaper than ever, accelerating market entry.
2. Increased Information Flow: Tools like SEOmoz and MixRank and platforms like Quora make acquisition strategies more transparent and easier to replicate.
3. Easier International Expansion: Platforms like Facebook and iOS reduce barriers to entry in international markets, speeding up global adoption.
Why Established Companies Struggle With New Channels
1. Risk Aversion: Large companies often hesitate to invest in unproven channels.
2. Resource Constraints: Startups are forced to innovate out of necessity, while incumbents rely on existing channels.
3. Product Channel Fit: Established products are rarely optimized for new channels, requiring significant investment in redesign and strategy shifts.
Key Takeaways
1. Understand the Cycle: Each new channel follows a predictable pattern—first movers, fast followers, niche/international players.
2. Adapt Quickly: Speed and focus are critical to taking advantage of emerging opportunities.
3. Focus on Product Fit: Tailor your product to the unique features of the channel to achieve success.
4. Anticipate Saturation: As channels mature, competition increases, making differentiation and retention even more critical.
By recognizing these patterns, startups and established companies alike can position themselves for growth in a constantly shifting ecosystem.
The emergence of new user acquisition channels often reshapes the landscape of the consumer internet. These channels create opportunities for startups and force established companies to adapt—or risk losing their competitive edge. Understanding the dynamics of these changes can help businesses thrive in a constantly evolving ecosystem.
The Evolution of Consumer Internet
New distribution channels, such as search (PPC & SEO), Facebook, and mobile, have repeatedly redefined the way companies grow. With each channel comes a predictable cycle of opportunities and challenges that disrupt the status quo.
Why Do New Channels Lead to New Companies?
1. Cheaper Acquisition: New channels initially offer lower customer acquisition costs (CAC), making it easier for startups to compete with established players.
2. Product Distribution Fit: Products need to align with the unique features of new channels. Established companies often struggle to adapt existing products to new channels, leaving room for startups to create tailored solutions.
Vertical and Channel Alignment
Not every vertical fits every channel. For example, email invites didn’t revolutionize online dating because users were unlikely to share their participation in such a service. Successful channel adoption depends on how well the vertical aligns with the channel’s characteristics.
The Fast Follower Advantage
While first movers exploit a new channel’s potential, fast followers often become long-term winners by refining the product and improving user retention.
Cycle of Evolution in New Channels:
1. First Movers (Exploitative): Rapid user acquisition but shallow user retention.
2. Fast Followers (Sustainable): Better user retention and monetization, leading to long-term dominance.
3. Niche and International Players: Focused on specific audiences or regions, finding advantages in deeper layers of the marketing funnel.
Shifts to Niche and International Audiences
When competition for the mass market becomes saturated, companies pivot to:
1. Niche Audiences: Companies focus on specific user segments, tailoring experiences for higher retention and monetization.
2. International Markets: Companies expand into less competitive regions, leveraging local expertise.
Accelerating Cycle Time
The speed of these cycles is increasing due to several factors:
1. Lower Costs: Building and launching products is faster and cheaper than ever, accelerating market entry.
2. Increased Information Flow: Tools like SEOmoz and MixRank and platforms like Quora make acquisition strategies more transparent and easier to replicate.
3. Easier International Expansion: Platforms like Facebook and iOS reduce barriers to entry in international markets, speeding up global adoption.
Why Established Companies Struggle With New Channels
1. Risk Aversion: Large companies often hesitate to invest in unproven channels.
2. Resource Constraints: Startups are forced to innovate out of necessity, while incumbents rely on existing channels.
3. Product Channel Fit: Established products are rarely optimized for new channels, requiring significant investment in redesign and strategy shifts.
Key Takeaways
1. Understand the Cycle: Each new channel follows a predictable pattern—first movers, fast followers, niche/international players.
2. Adapt Quickly: Speed and focus are critical to taking advantage of emerging opportunities.
3. Focus on Product Fit: Tailor your product to the unique features of the channel to achieve success.
4. Anticipate Saturation: As channels mature, competition increases, making differentiation and retention even more critical.
By recognizing these patterns, startups and established companies alike can position themselves for growth in a constantly shifting ecosystem.