WHAT MAKE A SUCCESSFUL DOTCOM SUCCEED?

V-1.0 beta by Minh Bui

Why this question? It’s simply because I love dotcom, dotcom technologies, dotcom
models, dotcom businesses and everything related to these stuffs. Internet has made the
world flatter and made our communication easier. None can deny that. From my
everlasting passion with internet companies, I just want to see them as a whole and to
scrutinize what make them succeed. Then the next step is How a tiny start-up can
simulate these giants to build up another successful one in Vietnam?

Firstly , let’s take a glance at some companies coming into my short-list

Hotmail, Gmail: email apps

Yahoo, Google, Baidu : search engines

MSN, Yahoo: portals

Ebay, Amazon: online super market

Digg, del.icio.us, Skype, PayPal, Google-Earth: online utilities

MySpace, YouTube, Facebook : social networking sites

Google News: news portal

Adsense, LinkExchange: advertising tools

Webvan, Boo, Pets : online stores

VietnamWorks, VinaGame, VnExpress.net, 24h.com.vn

In my opinion, each dotcom at least falls into one of two models and has three most
crucial factors to be able to get it’s trophy on the Internet. What are two models and three
rules?

1. Two models:

Breakthrough-by-technology model

Breakthrough-by-business-model model
2. Three rules

First-time rule

Content rule

Interactive rule

Two models

What is breakthrough-by-technology model and what is breakthrough-by-business-model

model? To create these concepts, I based on my views both as a software engineer and as
a marketeer.

Breakthrough-by-technology model means one company has got its terrific

achievements by excellent technology, it has surpassed other existed competitors on the
pool by creating an old-type-product with a new outstanding technology. With this
outstanding technology, it’s competitors feel very difficult to retrieve the lost shares
because they can not produce any better technology, even when they have a large number
of super brains and great engineers as well as a ton of dollars and diamonds :P. It seems a
impossible mission to defeat the existed breakthrough-by-technology-model leader (Of
course I mean a competion in a same level, not in a niche market). The best illustration
for this concept is the war between Google and Yahoo, MSN, Infoseek, Altavista…, the
second best example is how Skype dominates the VoiIP market. Other representatives of
this model are Google Adsense, Google Earth.

Breakthrough-by-business-model model means one company has got its fantastic

awards by introducing a breakthrough business model to the online world. A
breakthrough business model is a compeletely new one at that time (Hotmail, Yahoo,
Ebay, Amazon) or a-great-better-improvement-of-an-existed-business-model (Facebook,
Gmail). Facebook took over the market-leader position from MySpace with the second-
generation social networking model, Gmail draws most of email-user attentions by
providing a far better email capacity and a clever invitation marketing tactic. At the debut
time, Gmail 1Gb is a very big number if compared with Yahoo Mail 4Mb, and Hotmail
2Mb. It’s a possible mission to defeat the existed breakthrough-by-business-model
leader. Most of the newly successful dotcoms are based on this model. And most of
Vietnam start-up dotcoms will follow this model.

Three rules

1. First-time rule
Dotcom is the first one to appear on the market. As you already know: Hotmail is the first
email service, Yahoo is the first search engine, Ebay is the first auction site… They might
not really be the first ones to appear on the market, but at least they did make people
think that.

There is no doubt that after appearing of the pioneer, many other companies will copy to
build their competitive products. But the first-runer is often the first-runer, he has the
most powerful advantage to remain his leader position.

2. Content rule

Content must be from users or even from developers.
This means system doesn’t have to create its own content. The system only provides a
core engine/a market ground then users or developers will do the rest. Google/Google
News, Paypal, Ebay… are some of the best examples for this rule.
FaceBook excellently follows this rule: It even doesn’t have to create applications for
it’s users but it just created an open platform for developers. We can call it an open
online social networking platform. Developers voluntarily develop applications for
Facebook’s platform.

Content must be completely online. I mean a dotcom business is only related to
online stuffs. All of it’s user’s activities are online. It provides nothing from the
offline world. It doesn’t supply book, cd, or any products… so as a result it just needs
servers, software engineers, salepeople, and software. Most of the most successful
dotcoms follow this rule, except Amazon.
 Why this rule? To answer this question we have to back to answer Why online?
People do their online businesses because they can do something with a lower cost,
on a larger scale at any time with a high speed. So if an online business model is
related too much to offline content, this model can not utilize all the useful things of
the online world. Offline content often goes with offline problems: warehouse,
shipping, logistics... Offline problems are usually solved with higher cost.

The most important role of this rule is to help a company to do many great things
with a humble number of employees and a little of cost as well.

3. Interactive rule
System can be strongly interactive

Among end users: Ebay, MySpace, Digg... and all social networking sites. For
example, in Digg, people can rate for an article, then article with high-ranking
will be listed on the site so that other people can read. In social networking sites,
such as Yahoo 360 and Facebook, you can see that Facebook users’ interactions
are easier and more frequently than those of 360 users.

Between system and developers: Google Earth, Facebook (open online operating
system or platform). Developers can use Google Earth or Facebook to create their
own applications.

Among business partners: Amazon, Google Adsense, LinkExchange. People can
refer buyer to buy book on Amazon and get commission. Or they can use Adsense
code to advertise on their site to get advertising money from Adsense program.
Whenever system can be interactive among end users/developers/biz partners, it has the
bigger chance, the longer time to survive than it’s competitors. In this case,
users/developers/biz partners automatically create content and do marketing works for the
system.

Who violate the rules?

First time rule

MSN: this site disobeys rule 1 and rule 2 as well. It is neither a first search engine nor a
first business model, then it has to create many of it’s content. That’s the reason why it
always stays at the third position (after Google, Yahoo) even when backed by the giant
Microsoft.

Content rule - creating

Yahoo and MSN , as they are portal sites, often break content rule because they have to
create their own content: travel, sport, auto, finance… But let’s look at Google, it strictly
goes with this rule. Most of Google products just provide a core engine to handle a
problem. Two of Google’s products: Google Earth and Google Books have to create their
content, but after creating their content these products continue to follow part two of this
rule: everything is online.

Content rule – online

Many famous dotcom failures such as Webvan, Pets.com, Boo.com have shown us how
excellent they use up money by betting all to a much-offline model. Webvan wanted to
build a nationwide (US) chain of online grocery store, and it had even drawn $275
million from some of the big names: Sequoia Capital, Softbank, Goldman Sachs.
Pets.com backed by Amazon and wanted to be the online leading provider of food for
pets. Boo.com got $130 million and wanted to become the worlds first online global
sports retail site. Then they burned through all of investors’ money and went to the dead
land. What are their common properties?

Amazon business model focus to sale too many things from offline world, that why it had
to take many years (6 years) before making profit. One of the main reasons is the offline
cost (warehouse, shipping…) is too high. Any online model with many offline content
will cost its owners much of money, so if you can not draw a large amount of VC money
like Amazon – and if your company can not stay alive for years before dying, please
should not be seduced to violate this rule.

How about Vietnam’s dotcoms and applying of these rules?

Let’s see Vietnamworks and Vinagame the two biggest dotcoms at the moment. They
don’t have to create their content: Vietnamworks receives resume and jobs from job
seekers and employers, Vinagame just supplies online game for game players.

How about some of the next successful dotcoms: VnExpress and 24h: they have to build
a big team to create their content (break rule 2). Their users can not interact together
(break rule 3) while VietnamWorks users (job seekers and employers) as well as
Vinagame users (game players) can strongly interact together.

A successful dotcom might not follow all three rules, but the more careful it can apply
these rules, the more successful it can be.

Next version updates: virtual economy rule & virtual franchise rule.

Reference:
- Dotcom stories:
• http://www.internet-story.com
• Webvan: http://retailindustry.about.com/library/uc/uc_wiat9.htm
• Boo.com: http://news.bbc.co.uk/1/hi/business/1629742.stm
• Pets.com: http://www.news.com/2100-1017-248230.html
• Failures: http://www.witiger.com/ecommerce/dotcomfailures.htm
- Search Engine War:
• http://www.clickz.com/showPage.html?page=3080161
- Facebook’s story
• http://en.wikipedia.org/wiki/Facebook
• http://topics.nytimes.com/top/news/business/companies/facebook_inc/index.ht
ml?inline=nyt-org
 • http://www.nytimes.com/2007/10/04/technology/04facebook.html?_r=1&oref
=slogin
- Digg: http://en.wikipedia.org/wiki/Digg
- Gmail & Hotmail & Yahoo Mail: http://www.news.com/2100-1032_3-5182805.html
- Dot con, John Cassidy, 2002
- Google, Câu chuyện thần kỳ, David A.Vise & Mark Malseed, 2006

© 01-2008 by minh.buiduc@gmail.com