OnStartups

Did The 900-Pound Gorilla Just Vanquish Your Startup Or Validate It?

Posted by Dharmesh Shah on February 19, 2014 in guest strategy 9 Comments

The following is a guest post by Todd Garland, the founder and CEO of BuySellAds.  Todd is a long-time friend, and was one of the early employees at HubSpot before he set out to build his own startup.  This article is about how Google (the 900 pound gorilla) launched a product that directly competed with Todd's company.  The story is worth reading because almost every entrepreneur with any amount of success will have this happen some day. -Dharmesh

A few week’s ago, Google launched a service that directly competes with what our business has been doing (very successfully) for 6 years now, a service that helps publishers sell ads directly to advertisers. While I have thought about the “what if’s” and the scenarios surrounding a goliath competitor taking us on before, I never thought this day would actually come.

The first hour

I was numb – not in a bad way, but just numb; uncertain what to think, what to do, while attempting to make sense of, and digest, what had just happened. I scrambled a defensive comment together to post on TechCrunch who covered Google’s product release.

todd techcrunch message

Then, I composed an equally haphazard tweet:

todd tweet

… to which our supporters rallied around (ever so slightly) with support in the form of likes and re-tweets. “Ha”, I thought to myself, “don’t mess with us Google”, and the kind of bravado Google ad execs celebrating the release likely got a kick out of (if they even noticed…).

My team and I continued to talk about this, attempting to understand what it meant for our business. As a startup CEO, it’s times like this when the pressure is on. You have to sharpen your thoughts quickly and be able to articulate to your team how this might affect everything.

I’m uber-competitive, like most people trying to build big businesses, but sometimes being “uber-competitive” also means you venture into the “uber-defensive” state of mind. Lucky for me, I have a co-founder who helps me keep a cool head. All this to say: during the first hour you really just need to keep your cool and give yourself time, and some space, to let your thoughts process.

Knee-jerk reactions like those I made don’t actually do much for you, or the business. It’s best to just stay quite and give yourself time.

As the first hour came to a close it started to become evident that the BuySellAds world as we knew it wasn’t actually going to implode upon us. The following are my key takeaways from the 900-pound gorilla entering the ring with us:

Be pragmatic

The truth is that if Google actually wants to compete with your business, there is a decent chance you will lose. Google wins everything. Sure, there are outliers… Facebook, Twitter, et al who became so large that it was too late by the time Google entered the ring. The point is that most businesses the size of mine will get crushed if Google truly wants to compete… especially in the ad space. While the direct ad sales space is interesting, Google crushing my business will have an infinitesimally small impact on their balance sheet.

For the last 6 years, they’ve had bigger fish to fry (until now)

I discovered that they had actually started working on this product about 4 years ago (two years after BuySellAds first launched). Which means one of two things:

1. It could be that the direct ad sales landscape is just starting to mature enough to the point where they think it’s worth making a play.

2. Perhaps they are just closing off one of their flanks as this space starts to gain traction.

Competition from Google is a blessing in disguise

There are many reasons for this:

1. There’s no better way to get the most out of life, than knowing that one-day you will die. The very threat of a larger competitor will help us sharpen our product and our pitch to customers.

2. We have learned quite a bit that they have yet to learn about the direct ad sales space. Believe it or not, we have a hand up in experience in this specific space.

3. We’ve had a series of competitors over the last 6 years who haven’t seemed to achieve blazing success (despite raising large sums of money), which always worried me. Sure, it’s fun to think that you’re doing such a great job that you are beating them, but the truth is that they aren’t blazing a trail by us because the market just isn’t there. Trust me, our balance sheet, while showing signs of “success”, doesn’t have a hockey stick (yet). Any competitive market that is worth being in usually has at least a few solid competitors duking it out.

4. Smart people work at Google, and smart people typically like to work on things that are interesting with the hopes of achieving some level of success. Sure, not every product Google launches turns to gold; however, somebody smart at Google got the concept for this product past the $100 Million Dollar Man, who gave it his blessing to be worked on. That’s a positive signal for our space in general.

5. A teeny-tiny wee bit of added validation. Similar to my previous point, anything a company the size of Google does is noticed. They have far greater reach than BuySellAds, and there’s a good chance that they will end up sending us a decent amount of business simply because we have one of the best competitive solutions in the space.

Nothing actually changes

This is the most important takeaway. Sitting here a few weeks since Google’s launch, I can tell you with absolute certainty that nothing has actually changed. Looking back at the 6 years we’ve spent building BuySellAds, it’s clear that any time we spent thinking, researching, or reacting to our would-be competitors was a complete waste of time. In fact, there’s no better way to waste time than to think about (or even follow) what your competitors are doing. The only thing that truly matters are YOUR customers. I can’t tell you how hard it has been to get this engrained into my mind. It is by far the most important thing in building a business (to focus on your customers), yet so hard to practice when you see other activity and the glorious tech-headline touting presumed (or actual) success. They call it “customer driven development” not “competitor driven development” for a reason.

I must say, 6 years feels like a very long time looking back. We’ve written a ton of code, been through hell and back, and are still here. We’re bootstrapped, have been profitable, grown quarter over quarter, made the Inc500 (the only popularity contest that involves your balance sheet…), and while it certainly would be fun to coast off into the sunset, I feel like we’re just getting started. There is no better way to reinforce this feeling than welcoming the 900-pound gorilla into the ring. Everybody loves an underdog, and for us, it’s time to get to work.