In 2003, me and a partner decided it'd be pretty neat if companies could deploy firewalls that filtered AOL Instant Messenger, Jabber, and MSN IM, with rules for users and groups, not IP addresses, and with automatic encryption and message relaying to keep corporate secrets off the OSCAR servers.

Then AOL announced they were going to go release the same thing. We had pretty much everything but the user interface done.

Like the man said, "In a situation like this, there's a high potentiality for the common motherfucker to bitch out". We bitched out.

A few months later, AOL dropped the product. Akonix and IMlogic, two companies that didn't bitch out, went on to gross something like 30-40MM in revenue each. I stopped paying attention to them; I assume they exited nicely.

Your competitors don't decide whether you're going to succeed. Your judgement and execution do. We probably would have failed even if we kept moving --- our hearts weren't in it. Is yours? If you have to ask whether you're going to keep going, maybe you should do something else.

Two things:

1. Respond to all user emails within 24 hours or less - even if it's just to say "thanks" or "this should be released next month". Not only will you know exactly what your users want; they'll tell your friends how quickly you responded. And of course, don't ever ever use form responses/letters.

2. Keep your burn rate super low. If you do that you're a cockroach - no one can kill you.

Couldn't say better. And as soon as they will feel your competition they might buy you. That's probably the quickest way to exit?

Go for it. One of the projects I am working on is Yet Another Photo-sharing Site. Here in SF the first thing people ask is "Why? Why not just use Flickr?"

But when I leave SF, I tell people "I am making a photo sharing site, kind of like Flickr, but how I want it." The response I get is "Sounds Cool - what is Flickr?"

Sites like Fotolog and Photo.net and Photobucket eventually sold for way more than Flickr.

The point I'm trying to make is that if the market is big enough, there will be people who want to use your product, even if there is an entrenched competitor. In fact, your competitor may not be as entrenched as you think.

"Non-consumption is your greatest competitor"

I love this: In fact, your competitor may not be as entrenched as you think.

Photo.net? I don't think that sold. Still being funded by Philip Greenspun.

I stand corrected. Since I once actually got a job through photo.net's classifieds (back in the Ars Digita days) I'm glad to see it. The comments there however (the mention of debt, "terms were not disclosed") suggest it wasn't a terribly lucrative exit.

Seriously? Yet another photo-sharing site?

Unless it's a game changer like fotonauts, you might want to change your game plan.

It's just a side project, but thanks for the words of encouragement.

Hey man. I didn't mean to discourage you. I just don't want to see you wasting your precious development time. The most precious thing to a developer is his time. So I don't want to see another developer spending a lot of effort on his baby and yet it doesn't gain traction. I would rather the developer devote his time to some project that is different and have a better chance of succeeding.

if your photo app is going to bring something radically different to the table, then i say 'bring it on'

This is more to scratch my own itch. The online photo situation is so huge that there might even be a few, or many other people who like what I've built. If so, great. If not - I don't care, I built something I wanted to build. It isn't going to be radically different, just "sort of" different. Hopefully fun, too.

Sometimes I think hacker attitudes are way too dramatic. "Precious development time", "... my baby." Discouraging projects unless they are "radically different." Commit 100% or don't bother! Utmost passion and dedication to your online power saving widget! GO BIG OR GO HOME!

A lot of really good software was created on a lark. Some of it even became financially successful. It doesn't need to be quit your job and drop out of school to make the next Google (using Haskell, this time) or else you're wasting your time.

That said, at my day job I have genetically engineered biomolecules to act as a massively parallel neural network which can design new derivative investment instruments on the fly and corner the market on them before other hedge funds even know they exist. As a clever side-effect, this process unearths retrotransposon based cures for AIDS hidden in "junk DNA". My work has been "certified green" because the biological residue from the computations can be dumped onto ocean oil spills and automatically transform the petroleum into vegan friendly biodiesel which swims to shore on its own. I have also hacked my roomba to perform an advanced form of lasik surgery which restores sight and plan on sending it on a world tour to communities in the rain forest afflicted with "river blindness." Hopefully these advances in the state of the art more than make up for the time I'm wasting on my boring photo site.

EDIT: gotta give a shout out to my homies at CERN for hooking one of my molecules up with a free trip to the 11th dimension after they find the higgs. thanks, guys!

Thanks for the sarcasm. I didn't know it was a side project. You didn't mention it in your first post. I thought it was a full-time thing.

Imagine you know a friend who quits his job to focus on his photo-sharing startup that you know will be exactly the same as Flickr.

What would you do? Would you just support him blindly or would you advise him to differentiate his product from the competition?

"What would you do? Would you just support him blindly or would you advise him to do something else?"

Regardless of the idea, I would advise setting a squeal point in advance, a condition such as [cash < $20k] that will immediately trigger the action of giving up and looking for a job.

Aside from that caveat, I would give much the same advice as others have given here: focus on the needs of your users, keep your burn rate low, and code like a madman.

Common advice for new Go players is "lose your first 100 games as quickly as possible." Players who follow this advice invariably win their first game long before playing 100 games.

Fair enough. You made your point and it's a valid one.

But my observation is that it is very hard to beat the competition unless your product offers something compelling over theirs. Not impossible, but hard.

P.S. Chill out guys. It's not like as if i told menlopark to scrap his idea. I told him to change his game plan. To differentiate his product from the competition like what Fotonauts did.

One of YCombinator's "Startup ideas we'd like to fund" was "9. Photo/video sharing services." So there's somebody else out there that doesn't think Flickr/Photobucket/FaceBook is the last word in photo-sharing.

"...but how I want it" are powerful words. If existing products don't do what you want, and you can find a way to make them do what you want without a huge team and lots of $$, why not?

Like i said, if his app brings something different to the table like Fotonauts, bring it on (read my first post: I said change the game plan only if it offers nothing different over the existing services. I didn't say forget about the idea).

It's just that I've seen too many startups doing photo-sharing sites (admit it. You've seen your fair share of them) promising something different but in the end, they offer nothing compelling over the current services.

It's like someone saying they want to build a craigslist killer because of all sort of cool features that they can't do with craigslist. And when they launch it, yeah they're right. There are some cool features that they can't do with craigslist like advanced filtering but these are not compelling enough to differentiate themselves.

That furiouslol guy just wants to scare you off so you won't be raining on his parade when he launches his photo sharing site next week.

What new thing do you think Fotonauts really brings to the table that the end user cares about? Not all innovations bring masses of users.

Fotonauts will appeal very much to the wikipedia crowd. Like wikipedia, I expect a small minority being responsible in generating most of the content.

In no time, Fotonauts will start attracting the masses in being a reference photo site. Eg. if I want to know more about tattoos, I won't go to Flickr. I just get pictures of tattoos at Flickr. At Fotonauts, I'll get to see the photos and relevant content about tattoos.

invite please?

You're asking the wrong guy man. I myself am waiting to try out the service.

My opinions about them were based on the demo they gave at TC50

Definitely don't ignore them. Learn from them. Do all you can to see what works for them and what doesn't. Pay close attention to what users (and blogs) are saying about the product. What do they like? What do they dislike? What features are they asking for? This competitor will give you they best market research money can buy - for free.

...and then execute with the speed of a-thousand-startled-gazelles. Some wise lisp programmer once said - I'm paraphrasing - that one of the reasons his company was able to compete in a market of 30 odd players was that they could often duplicate a new feature within a day or two of a competitor announcing it in a press release.

You're small and unencumbered, and if your heart is really, truly in it, bloody dangerous. Good luck.

> Some wise lisp programmer once said - I'm paraphrasing - that one of the reasons his company was able to compete in a market of 30 odd players was that they could often duplicate a new feature within a day or two of a competitor announcing it in a press release.

That was YC's own Paul Graham talking about ViaWeb i think.

Yes, it's from his Beating the Averages essay: http://paulgraham.com/avg.html

That may have more to do with lisp than with having one's heart in it.

Edit: I'd venture to guess both are necessary, albeit to different degrees.

I've been reviewing web apps recently for accounting within my startup, there's a lot of offerings and most of them cover all the same functionality.

But even though they all do the same thing, its the way that they've implemented the functions that makes each app different, and has ultimately influenced my decision.

At this point, I have no idea what one came along first, that doesn't matter to my decision, and I didn't just pick the first one I found, I reviewed 5-6 before making a choice.

Another point is, that after your initial release hopefully you'll get a user base who will provide you with feedback and ideas, its up to you how you act on that feedback. You may react to your users differently than your competitors, and ultimately that too will distinguish you from them further.

Good luck!

I had the very same experience recently. I tried a couple of different web and desktop apps for time tracking before settling on Harvest, which I like. Harvest isn't obviously better than the others, but there are subtle ways in which it works that fit me well.

Web apps are easy for users to try out for a while. So build a couple of differentiating features and see if a subset of the (apparently lucrative!) market tries your site and sticks with it.

Would you mind highlighting what features you liked from harvest that were unavailable in different apps?

I wish I remembered the details. Seriously, it was subtle enough that I've forgotten.

The Dashboard widget for recording your time was one -- Harvest's is nice, especially because you can easily switch from client project to client project with the UI. But the thing which ultimately switched me over was the ability to fully customize the line items on invoices -- I was able to get the style I wanted with a few clicks, and I can easily edit and merge line items if I want to. For me, it hits the sweet spot between doing things automatically and allowing you to edit things.

Of course, once I switched over to Harvest I gradually became subliminally aware of other reasons to like it. I haven't found myself wanting to try out anything else.

I'm not mechanical_fish, but Harvest just felt right to me. It was easy to use; gave easy, flexible reports (important when I'm billing clients for my hours and my employees' hours); easy, private access for employees; reminder emails that I could trigger ("Get your hours in!"). It wasn't a clear thing, but the right mix of features and the right feel.

So maybe something intangible. Is that a cop-out answer?

Wrap a dead fish up in some newspaper. Mail it to them with a kind but clear warning that they better pack it up and go elsewhere.

I doubt the efficacy of sending someone salmon steaks. How about live fish wrapped in newspapers instead?

Obv you've never smelled a two day old fillet.

What, no horse-head-in-the-bedroom?

I mean, you could, but do you really want to saw a horse's head off? Anything bigger than a cricket is too much for me.

I'm not a huge cod fan myself, but fish'n'chips isn't that bad.

Large markets almost always have room for a #2. However, unless you can make substantive improvements over their product or target a different niche that they are missing, you could be in for a hard slog.

I'm probably going to be the sole wet blanket here.

Ask yourself this question. Will your product be substantially different from this competitor's product?

If yes, you might want to do something else. Like what you said, this competitor has growing traction. It'll be difficult for you to break the momentum especially if you provide nothing different.

If you really want to fight with this competitor well, you must offer something different to the users. Eg. tumblr or posterous is like a super-easy lite version of wordpress. That's why they're gaining traction. There are probably XXX number of blogging systems out there that are similar to blogger/wordpress and they just can't break through. Those that broke through differentiate themselves well from these existing services.

dropbox is not like the hundred other online storage site. Their interface is brain-dead simple compared to the competition.

Will your product be so? That's the question you have to ask yourself.

I'm not saying this to be a spoilsport but to help you prevent wasting your precious development time.

Takeaway point is similar to what the others have said:

- Learn from your competition and differentiate yourself from them

- There are competitors all the time. So learn to live with them and out-execute them.

- Being late to the party is not a problem as long as you execute well (See dropbox)

Another good example is Box.net. They were in a crowded space. They were not first but they differentiate themselves from the competition by offering an easy + social UI that makes sharing fun. It all boils down to execution.

Good luck with your project!

I saw reddit as a digg.com competitor when they launched. Much, much smaller, less hyped, but guess who found an exit first? Small competitors to large, VC-funded products often do well, perhaps partially helped by the hype surrounding the leader. Jaiku would be another example.

Of course it's normal. Ask everyone from Pepsi to Burger King. :-)

That being said, from the sounds of it, the competitor seems to be very visible in the market. Given that, can you see that there is something that they're not doing? Is there are group of users that are under-served? Do you figure one might surface? It looks like they've got you beat feature wise, but can you go the other way even further? (Super simple?) These are areas that you can explore.

At any rate, keep going. You idea has been validated. It's a big world out there, odds are in the next two months you'll understand that there will be room for you, them, and probably a few others.

Good luck.

There will always be competition. There are probably half a dozen other companies doing similar things that you just don't know about yet. Most of the really successful companies that I can think of weren't the first ones on the market.

Like others have said, learn from them. Figure out some need that they're not addressing and sure up that niche and try to grow from there. That may actually lead you to a point where you're not going head-on against them, and even if it doesn't it'll give you some runway before you're really going one-on-one.

I would definitely suggest that you not give up development of your idea.

As someone else has already said, learn from your competition and make your product better as a result.

If the idea you're working on is a good one, then you're almost bound to have competition. So I see competition as a sign that I'm on the right track.

Keep at it! You just have to make your implementation a little bit better than the other guy.

Competition also validates the market in that some won't buy unless there is more than one supplier; the first doesn't always win (Edison had the 19th light bulb patent); and your greatest competitor is non-consumption (not this competitor).

There's one danger in learning from them: don't become fixated or intimidated. What you have to offer is your passion for that "fresh take", which is still your original idea, and is still real, and is still needed by people.

It will turn out that your "fresh take" is not identical with theirs - non-identical features, non-identical audience. It could be that yours is better.

Marketing is important - if you are "far from" being an expert, one way to gain experience is to have a go.

I want to encourage you, but courage is only needed because of the unknown. A start-up is high-risk, with many risks and many ways to die. A competitor is just one of them. But fortunately, the plurality of risks doesn't really matter, as you can only die once.

If the market supports a number of competitors that are doing OK, and you are fine with working in that market, then go for it.

If you were wanting to be a category-killer then it doesn't sound like your market is suitable for that. So if you're playing "Go Big or Go Home."; you should find another market.

Right. The good thing about markets is that there are always options. There isn't one brand of dish detergent, one brand of cookware or one brand of bacon. "Go big or Go Home" is a bad mentality to get into because you're going to find yourself worried more about what other people are doing, worried about failure, instead of worrying about what you should be doing.

I was specifically referring to the book by that title, which you should at least glance at if you are doing a startup. http://www.gobignetwork.com/products/GoBigBook.aspx

Basically, if you are going that route, you want to be the 80-ton gorilla in your market, you want to be first, biggest and most; you want to be Amazon, or eBay, or Google; not booksamillion, or ask.com.

From a distant perspective, it doesn't really matter if you build a world-changing, industry-creating, market-dominating company or a niche lifestyle company.

But if you aim low, you'll hit low.

Google wasn't the first search engine.

Ask Graham's Question: Are you still creating value? Take your eyes off the greenbacks for a second - are there still more-satisfied users at the end of your quest, or is it now only about the money?

You should look at this as a good thing. You can use them to see what work and what doesn't. Adjust your product and add features that your competitor lacks. Any market worth while will have competitors.

If you believe in your idea, keep going. While they may have hit first, you can adjust your strategy now that their hand has been played.

This sort of thing happens all the time; few ideas are truly original.

Paul Graham mentioned in one of his essays that although ViaWeb faced tough competition he knew that working hard enough, his team could implement features that would force his competitors to drag themselves over rocky terrain just to try and keep up.

If you think there's a chance in hell, give it a go. Otherwise you'll always wonder 'what if...?'

If you love what you do, keep doing it. Improve upon what they have, whether that be the customer support, the interface, an extra feature or two, integration with other services... competition is good for you.

If you are screwed because somebody beat you to the punch - then you were screwed anyway. Sustainable companies have a lot more going for them than just being a few months early than the other guy.

You have the "second move" in this chess game of monopolistic competition. Even highly successful, technically superior, first-to-market products have been beaten out by competitors.

there are millions of people in this country. Even now when I tell people about craigslist they ask what is that? There is always place to compete.

I mean look at eBay, they are in world known, but their user base is only 144 million people world wide. Sure it sounds huge, but in reality its just a tiny portion.

As long as there is no first comer advantage(i.e. how eBay pretty much has a monopoly on auctions), you can launch a decade later, and still manage to get up on top(i.e. Google)

It's not as much about the idea as about the execution. But your idea has been validated. And so has your idea-generation. Quit your 9-5 and start off on this full time.

What kind of application is it? How you would compete depends a lot on the nature of your audience.

Profit, is the 100 pound gorilla. Can two company survive and make money both at the same time?

If you have same set of features, then beat them on the UI.

what's your exit strategy? For example, if you were planning on getting bought let's say 100M - with a competing company, that might mean you might get bought for higher or lower depending on the timing. Assuming a bidding war, if someone buys your competitor first, the losing bidder might just buy your company for roughly around the same price (or higher) for PARITY. It probably helps to stick around.