A niche that’s bigger than a green field

I don’t believe in Facebook.

No, let’s try it again – I don’t believe in YOU being able to create another Facebook. Don’t get me wrong, it’s not you – I can’t make one either. And it’s not because we’re dumb – it’s because facebook solves no particular problem at all. Nobody had a need that facebook solved. Nobody was begging for it, crying about millions of wasted dollars that could have been saved if only facebook was there. Since there was no need, the chance of facebook ever succeeding was basically zero.

Yes, this post is about finding your niche.

Let’s start debunking one of the most famous myths in entrepreneurship: the need for a “large enough pie.”

“My product is applicable to every adult on the planet! If we’re even mildly successful, we’ll be able to sell to just ONE PERCENT! And that’s amounts to a billion dollars a minute!..”

Fine, I promise you – no more exaggerations for a couple minutes.

Admit it, though: you’ve heard some version of this pitch, with similar numbers that seemed so believable. A product that aims to serve everyone serves noone. If you are creating something that truly everyone can use, it is by definition so shallow in its usefulness that noone will extract serious value out of it and pay you for it. And don’t bring up the iPhone as a counter-example – it’s not a product created from scratch. It’s a product created by people who’ve been making similar products for a decade, with a multi-billion-dollar investment.

If you’re lucky, you’ll create Mint.com.

Let’s look at Mint and why they’re successful. They chose a TINY niche – personal finance – where people were really struggling. Existing solutions cost money and were incredibly clunky; there was more than enough research suggesting that individuals that track their finances tend to be better off in the long run. The public had a need and a want; creators of Mint didn’t have to make one up for them. Their product took off like fire – a typical seven-year overnight wonder.

Why? It is much easier to sell something that people *already have a need for* than convince them that they have a need, and then sell them your snow in winter. Do people *need* a fart app? Do they have some sort of mental gas that they need to pass?..

Contrast this with a coloring book kids app that my friend makes, Colorama. People have a need to keep their kid busy when they’re in a social setting. That need doesn’t need to be explained – it’s obvious to the parents. The simple app my friend built just capitalizes on that need – a very niche need, that is – and simply delivers on this very narrow promise.

I’ll claim that the narrower the need, the easier it is to satisfy. And the happier the people will be with your product in the end.

I’ll also claim that there are unmet needs – small needs – everywhere you look. From scheduling software in your dentists’ office, to a yield management system for the nearby restaurant, to organic/fair trade coffee shop in your neighborhood.

Moreover, these small needs have another characteristic: the solutions frequently need no capital to start. Your customers are right there, just talk to them. Start your company as a consulting business if you have to. Do you know what most consumer-focused startups would pay for a customer that’s telling them how much they need their product – and is willing to pay for it?..

Who cares that your product doesn’t have a potential to be a billion dollar business? Who cares, seriously? Are you telling me that you won’t be happy with 10 million? 50 million? Because mint.com was sold to Intuit for $170 mil. Not too shabby, huh?

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  1. Good observations in your post. And, another concept you just began to touch in us the fact that a good business always had the option to evolve if it stays close to its customers, evolve in directions unconceived of when the business is first started.

    1. Larisa – I agree wholeheartedly. This is where the team aspect of this game becomes key. It doesn’t matter what process you’re following, or what idea you have, if the team is crappy. A bad team will screw all of that up.

      A good team will start with a bad idea and evolve it; it’ll start with no process at all and will define a new process to make things work. One brilliant, very successful person I met recently suggested a bus driver mentality – from the Good to Great book – is exactly that concept. Get the right people on your bus; all else is secondary.

  2. facebook does answer a problem and there is no reason to believe that the future won’t bring us a new facebook.

    facebook solves the problem of people who want to use the internet to easily collect and organize information about their friends and family. basically to put their social life online.

    its a pretty broad problem which i think has something to do with both its success and its perceived market security?

    the challenge is that users / developers don’t really see how a new facebook could improve upon the above stated problem OR improve upon the issues facebook presents (such as privacy issues)… but most importantly, we can’t imagine a new facebook that is so innovative as to break our internet habits and rituals.

    look at bing vs google. bing may have introduced some UX innovations but that didn’t really steal any users from google? if anything, it gave opportunity for google to improve their UX by taking the good and leaving the bad?

    anyhow. i don’t really know what i’m talking about so i’m out =)

    1. Joshua – the problem with creating a business like Facebook is that nobody was paying to organize information about their friends and family, to put their social life online. It’s feasible to start a business in a realm where people are already feeling the pain, and are going with inefficient solutions. When you have to convince your customers that they HAVE a pain – or, almost as bad – if you have to invent a crazy way to monetize the business (like ads), you’re in serious trouble from the start, and your chances aren’t 1 out of 100 like an average startup. They’re probably 1 out of 10 thousands.

      On the subject of Bing versus Google, building a new Facebook, or more broadly, slaying a dragon of “huge head start in a marketplace that has network effects”, I have a blog article coming this week that’ll discuss it in detail. What I’ll say now is “10% better is 100% different”, and people won’t switch just for a small incremental improvement. Your solution has to be groundbreaking to make people change their habits.

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