First mover advantage

First mover advantage is exactly that -an advantage that needs to be exploited, not a right to succeed. It may well not be enough to repeat the same tactics that gave you the advantage, since the competition may be anticipating that or the market may now take that for granted and look for something else. You have to keep on innovating.

In a game of tennis, if you reach advantage, the game is yours to win. But if you play the next point in a predictable way, your opponent may well anticipate you and find the shots to claw back your advantage.

Companies that are first to market can go on to dominate – look at eBay in online auctions – but they have to continue to innovate and anticipate the next trends or they risk disappearing (remember the spreadsheet programs of Visicalc, then Supercalc then Lotus).

Of course, there may be disadvantages in being first mover as well – the latest technology may have unforseen problems or it make take longer than expected to sell a new solution to a sceptical market. But the first mover is best placed to understand and react to these issues – as long as they are constantly examining their operations in order to improve them and using feedback from the market to adapt.

Something for nothing

Internet users expect more and more services for free : apart from basic free access to information, we already have free music downloads (initially illegal but more and more sites are offering legal versions), free software (especially cloud computing services), free video, free telephony via IP and so on.

There are free ISPs so users do not have to pay for connection, free wifi access in many places (though you may need to buy a cappuccino which may be quite expensive) and there have even been free PC offers in the past, though they were not successful.

While some of these free services are provided by people who are keen to share their great programming skills and gain some kudos (freeware software for example), the majority is paid for by advertising.

But how long can advertising continue to pay for the increasing range of free services for an increasing number of users?

Online global advertising spend is currently $40 billion annually. This sum provides $40 annually to pay for the free online services of 1 billion Internet users.

It is not much to pay for our consumption of more and more music, video, software, storage and other services.

Maybe the rise of the phone will change the model. People are used to paying for phone services. But on the other hand, the emergence of flat rate data tariffs and competition between mobile operators is likely to limit this source of finance.

What will happen if we wake up one day and find that there is no longer the money to pay for the free services we have grown so used to?