The Myth of Innovation and the First-Mover Advantage
Lots of people today dream about having their own startup company. These aspiring entrepreneurs are constantly looking for ideas, and in general they believe that a good startup idea must be very innovative, and better yet if they can be the first-mover in a new market. However if we analyze the most successful hi-tech companies today, we can observe that many of them were not so innovative, and most of them were not first-movers. A good example are Instant Messaging platforms.
WhatsApp is the leading Instant Messaging app today. It was created in 2009, and by the end of 2013 it already had 400 million active users. WhatsApp was acquired by Facebook in February 2014 for the amazing value of U$19 billion. By February 2018, WhatsApp already had a user base of over one and a half billion people globally. This is certainly a great success story! But can we say that WhatsApp was really innovative? Did it have any first-mover advantage?
Do you remember ICQ? ICQ was created by the Israeli company Mirabilis in 1996. That’s 22 years ago! It was acquired by AOL on June 1998 for U$400 million, which was the highest price ever paid to purchase an Israeli startup company. At its peak around 2001, ICQ had more than 100 million accounts registered. ICQ provided the same functionality that is provided by WhatsApp today, but of course ICQ ran on a desktop, and not on mobile devices.
So, can we say that WhatsApp’s innovation was providing Instant Messaging (IM) over mobile devices? Certainly not! Actually, I myself worked for two different Israeli startup companies that provided IM on mobile. The first was NomadIQ (latter acquired by OmniSky), and the second was Followap (which was acquired by Neustar).
NomadIQ was founded in Jerusalem in 1999. We developed IM and Location Based services for handheld devices such as the Palm and the PocketPC. These devices, which were also called Personal Digital Assistants (PDAs), were very similar in shape and size to modern smartphones. But they had to be connected to external modems in order to access the Internet. NomadIQ was acquired by OmniSky in January 2001 for U$40 million. Below you can watch a promotional video explaining our services at that time.
Followap was founded in Haifa in 1999. We developed IM services for the first mobile phones, which are also known as “feature phones”. At this time Nokia was the leading mobile phone manufacturer. The screen sizes were very small, and people had to write textual messages using the numeric keyboard. Even so, Followap services reached more than 200 million subscribers. Followap was acquired by Neustar in November 2006 for U$140 million. You can watch below a video explaining Followap’s services.
Now, after you have watched these videos, I ask again: Can we say that WhatsApp was really innovative? Did it have any first-mover advantage?
I think the answer to both questions is “no”. So perhaps what startup companies really need to be successful is the right timing. Companies such as NomadIQ and Followap had the right vision, but they were simply ahead of their time.