Aaron Wall offers up some good thoughts on why Most Web 2.0 Companies will Fail. His discussion focuses on the leverage they seem to lack. He ends the post with “The reason most Web2.0 companies will fail is that they are creating entire companies based around a feature to another product, while having no market leverage.”
And, he is absolutely correct. Features do not result in long term companies. Maybe, I said maybe, a company that is based on a feature can create some value and sell themselves at an early point in their lives, but this is just a tough way for an entrpeneur or an investor to make a bet.
One way to think about this is who really has control of the customer? If you truly control the customer, you may have something interesting. The reason I say this is that if you build a product, which is really a feature for someone else’s product, that other company has control of the customer. As soon as they implement the same feature and roll it our to their customers, your business is gone.
Just not a good place to be!