Are tech companies too big for startups to compete with?
Priya Wadhwa
Industry Watch

Are tech companies too big for startups to compete with?

Governments and activists are calling for big tech breakups

Amazon is the largest e-commerce platform. Facebook is the biggest social media giant. Apple still has more customer loyalty than its competitors. Google is unsurpassed in use.

It seems extremely difficult for local startups in these arenas to compete with the big guns of the industry. And there is one simple reason behind it: their large customer base.

These tech giants had the foresight to expand their customer base before focusing on increasing profit bottom-lines. They are still doing this by expanding to the rest of the world. Amazon took over, and launched in India after not coming to a deal with the now Walmart-owned Flipkart. Facebook took over Instagram and WhatsApp. Google introduced multiple services to address needs of a larger audience, surpassing competition.

They have now become so big, that antitrust groups are campaigning for regulations, governments are taking notice, and people are becoming suspicious and uncomfortable with the power they hold in their hands. Facebook has come under scrutiny over data influencing political campaigns. Amazon is pouring money into reputation management as local vendors are complaining the company is undercutting their profits for larger market share. Google is often in the news over data privacy concerns, which is also a common theme for most other tech giants.

The power that comes with their size is now becoming a problem in the public eye, gaining the attention of the same customers they rely on for power. This means there is a chance for others to take advantage of the situation and rise to the competition.

However, their current size is a major deterrent factor for other similar companies to compete in countries where they are present. Since most of them are present worldwide, this is faced by almost all across the globe; except China, and developing countries where Amazon and Uber haven’t expanded to, where local startups have been quick to launch their own platforms.

Even then, Amazon has quickly either taken over these general e-commerce startups or launched themselves in the market, giving stiff competition by undercutting competitors, owing to their money power. Uber too took over Careem in the Middle East, in spite of facing stiff competition.

The question begs, how can others become bigger than—or as big as—these current giants? The answer is as simple in theory than it is hard in practical realisation. The only way to become a big gun in the industry is not to follow the current giants’ business models, but to find a gap in the market to create a new platform that offers a unique never-before-seen service.

The model may practically not be present in the world today. But when you think about it, Facebook, Google, Spotify, Amazon, Uber and others were also not present when they launched. They offered a unique service and built the demand for themselves. They were unique, unlike any other in the market, and that’s why they thrived. Even though there were some other like them, like Orkut, Yahoo, Bing, local taxis, they changed the modus operandi of the industry.

They challenged the way things were with a different model, offered ease, solved a problem, introduced a new solution. The one thing they did not do was to copy what others were doing. Souq and Flipkart did well because they offered the e-commerce platform where Amazon was not present. It was inevitable that they would be bought by their international competitors, especially from the US where investors inject larger funds into the growth of companies.

You might think why not disrupt the current way things work with a better model, by adding unique features. While this may be a safe way to go, and easier way to attract the trust of VCs and other investors, there are two considerations.

One, if you’re making the model of the current tech giant better, they have the fiscal power to copy the idea to incorporate on their own platform, introducing it to the world faster than you can. Plus they’ll gain the credit for it as they’ll introduce it to their already-existing customer base; once again putting you at a disadvantage.

Two, even if you do manage to do well and give them tough competition owing to your regional insights, you could still be bought out. Just like Careem.

It is a tough market to expect exponential growth quickly. All the current giants had the growing tech sphere on their side, and still took years to become as big as they are today. They had their struggles and miracles.

However, startups could still become the next tech giants if they find a service that solves a inherent problem in the system, or find the next big thing in the industry, and believe in their idea enough to realise its potential. There are many struggles on the road for an entrepreneur, with pressures to exit by investors.

Even then, there is still a sliver of optimism, because every company has their lifecycle. Startups have two advantages to make it big: flexibility to maneuver to the demands of the market, and ability to address problems that the current giants have posed to the world. Trust in them in on a decline, hence a solid solution will always be welcome by the same people who are currently the powerful customer base of tech giants.