3 Ways to Win the David vs. Googliath Fight

Good advice from GigaOm:

1. Be a spoiler. Companies consistently make poor strategy decisions when they’re busy trying to defend existing revenue streams. But just because you’re small doesn’t mean you can’t squeeze the market. Create a product at a tenth of the price of Goliath’s. This forces all vendors, including Goliath, to cannibalize their own revenues to stay competitive. And while it will shrink the dollar size of the overall market, you will end up capturing share.

For example, we built our software largely on open source, so we were able to offer BlueTie’s email and collaboration products at a 90 percent discount to Google Apps or Microsoft Hosted Exchange — and still make money. If we cut prices further, it will hurt Google and Microsoft far more than it hurts us (or other, less-entrenched firms like us).

2. Change the yard stick. Advertisers ultimately care about revenue, not eyeballs, page views, or clicks. Today’s ad measurement tools are a long way from giving advertisers end-to-end transparency. Advertisers want to see how spend translates into revenue. You can argue you are providing brand advertising until you are blue in the face, but in a recession, marketers are going to look for results. Even brand advertising has the goal of enhancing the brand to drive long-term customer preference and revenue.

If you create a new way to measure the flow from ad spend to revenue that reduces advertisers’ risk, they will flock to it, and force your competitors to change as well. Even Google will be ultimately forced to adopt the model that advertisers demand.

There is a huge need for better yard sticks to measure advertising effectiveness. If you can raise the bar, you will force everyone else to change focus to match you.

3. Obliterate the business model. There is nothing that is more painful to a market Goliath than a shift in the underlying business model. Selling your product at only a marginal discount is not a new business model. Forging a new distribution channel is, and Blockbuster has yet to fully recover from Netflix. Can you change the product strategy to commoditize the market and make money on add-ons? Think Go Daddy. Can you change the distribution model? Think FriendFeed.