Dominate Your Market: How Self Contained Communities Create Permanent Barriers To Entry

By Yaro Starak
32 Comments

Some of my early readers may recall that I was a Magic: The Gathering card player as a teenager. No, that’s not dungeons and dragons or role playing or anything like that. It’s closer to poker combined with chess with a little bit of lord of the rings story telling thrown in. It’s a “mind sport” as far as the PR people at Wizards of the Coast, the company that produces the game, are concerned, although I’m not sure that’s the most accurate label.

Whatever the case, “Magic” as we call it, is a serious game for some people, and besides the first two or so years where I played for fun, most of the latter years in my career as a card gamer, were about trying to win tournaments.

Tournament Magic is big, with millions of dollars given away in a pro tour that travels around the world. Some guys even play the game professionally as their full time job. I never won big money as a gamer (my highlight was representation on the 98 Australian national team at the World Championships), but I did get to visit Japan, Singapore and the USA thanks to gaming. I look back on those years as a lot of fun.

Magic Cards Are Money

Magic cards, like baseball cards, are collectible. Each card has a value, and for a long time I made my lunch money by trading and selling the cards I won at tournaments. As a typical entrepreneur, I often enjoyed the business of running a little card shop as a teenager more so than playing the game itself (unless I was winning a tournament of course!).

Wizards of the Coast (let’s just call them “Wizards”) made some very smart moves with Magic. It became a serious cash cow for them.

In case you are wondering how they keep the cash coming in, each year Wizards produces new cards so the pool of cards people play with at tournaments is constantly cycling over. This makes the playing field very dynamic, but it was also a brilliant business decision as they keep making new cards that players need to purchase in order to stay up to date.

It’s fair to say that effectively, Wizards produced a new form of currency, at least within the realm of their customer’s universe. As long as the cards have value to players of the game, they can print money simply by printing new sets of cards.

Wizards Goes One Better

I thought that Wizards had a good thing going already, but when the Internet came along, the did something really clever – they ported Magic over to the virtual world.

Online Magic is pretty much the same as offline, or real world Magic. You challenge people from all over the world to a game, you can play in tournaments to win more cards and cash and you can buy and trade cards virtually with other people.

The kicker is that the online digital cards have roughly the same value as the physical cards. You can buy packs of cards for the same price, but instead of receiving little pieces of cardboard with pictures on them, you receive digital cards with pictures on them that are stored on computers.

In other words, Wizards can now print money online, with the cost of production and distribution drastically reduced. All I can say is that is one heck of a good business model.

The Power Of A Self Contained Community

One of the amazing things about Magic is how resilient it has been over the years. The game is over 15 years old and while many competing card games have surfaced, one for pretty much every pop-culture television show or movie that gains any following (think Star Trek, Star Wars, Battlestar Gallactica, DC/Marvel Universe, and the list goes on…), none of them managed to supersede Magic as the supreme collectible card game.

Magic is not the only game to profit from a self-contained and fanatical community. In more recent years virtual gaming communities have arisen, not surprisingly targeting very similar demographics of people as Magic, like online computer games such as World of Warcraft and Ultimate Online that target mostly young males.

I’ve never been lured into online gaming, but I’ve seen what it can do to people. Gamers can lose entire weeks at a time, existing in a virtual world and interacting with other people who are sitting at their computers possibly anywhere in the world doing the same thing. It’s kind of perverse, getting your social interaction in an environment that doesn’t include any people around you (unless you’re in a LAN party), but who am I to talk, I work at home alone most of the day and only speak to people online.

Facebook is another great example of a self contained community, in fact it’s probably the best example we have today because it targets pretty much the entire online population of this planet.

I was amazed recently when I was in Canada and my 20 year old cousins all but said that email is dead to them because they just use Facebook to communicate with friends. Think about that, an entire generation of people who you can’t market to via email because they don’t pay attention to it.

Facebook has effectively created their own country on the world wide web. It’s such a compelling community that it doesn’t need Google traffic to survive like most websites. It simply relies on the lure of the innate human desire to connect with other human beings and works to help facilitate that communication. Like what Google is to search, Facebook is to community, providing the tools that people come to rely upon as part of their every day lives to do every day things.

User Generated Content

I’ve written numerous times about the power of user generated content. Content for us bloggers is our currency, but let’s face it, it’s much easier when you own a website that doesn’t require you contribute content to it personally or ever need to spend money to hire writers to create content. What you want is people creating the content – the value – for you, so you can watch your traffic increase and work on how you can profit from it.

That’s exactly the reason why, during my years investing in website property, I focused on purchasing forums. Forums are communities, with user generated content, which can become very dominant in their market, especially if they gain critical mass before any other community in that niche.

What Is Critical Mass?

Years ago when I was still chasing new opportunities online I read the eBay story, a great book that explains how the founder of eBay grew the company to what it is today. I loved this particular book and business case study because the owner had the problem most of us could only wish for – too many users coming in too quickly.

EBay grew tremendously fast and it uses the many-to-many, user generated content business model to great success. The owners facilitated the transactions between buyers and sellers, thus they could theoretically scale to handle as many people as they wanted, assuming they could keep on top of the technology needed to keep delivering the service (that was the challenge).

EBay won the auction war because it gained critical mass before any other auction site and then worked darn hard to maintain the leadership position. Critical mass, in eBay’s case, came when sellers realized they could get the best price and sell the most goods because eBay had the most buyers. Buyers go to eBay because that is where the most sellers are and thus they have more choice of what to buy and whom to buy from.

Other auction sites struggled when they couldn’t get a result for a seller because they didn’t have enough buyers, thus sellers didn’t want to use their service, and buyers and no one to buy from. It’s a classic catch 22, you can’t win until you win. Whoever was the first to win – the first to gain critical mass – would have to screw up pretty badly to lose their market leadership position.

Let’s Make Software and Sell It

I’ve done quite a few different things online, but today I make most of my money thanks to selling information products, either of my own creation or others people’s products. I benefit from being a “maven”, an expert in my market. I’ve spent the last four years blogging, writing my newsletter and free reports to establish my status (not to mention the six years of practical experience before that), and it’s rewarded me very well financially.

I advocate this strategy as well to my students. You should look to become an authority, establish your credibility and then leverage it to maintain leadership and dominate your market.

This article however talks about something else. A community site, with user generated content based upon a unique technological architecture that delivers a service that people want, when it reaches critical mass, can be a multi-million dollar business model, even a multi-billion dollar business for the truly global ideas like Facebook.

If working years, publishing unique content to establish your maven status is not in your interest, then you’re probably thinking about developing some kind of software to sell online, or building a community site. You could focus on delivering a product that simply meets a need, stick up a sales page and sell it, but eventually you’re going to reach a saturation point. If you have no point of differentiation, then competition can come in and erode your profits.

Self-contained community sites are all the rage now, and while I’m not advocating that you attempt to build the next Facebook (by all means go for that if you think your idea is good enough), there’s no reason why you can’t consider all the concepts in this article as ways to protect yourself from competition and dominate your market.

Add community components to your business, find ways for users to create content, develop a service that meets a need that all human beings have, and you can win, big time.

Whom Do You Trust?

The future, especially online, is going to be shaped by two of the most powerful influences in today’s society –

  1. The trusted expert
  2. The wisdom of the crowd

Mavens, especially mavens who have focused on constantly delivering more free value than any other person in their market by moving the freeline, will ever more so be the leaders.

Faced with too many choices, users look to even fewer people for advice because it’s too hard to keep up with everyone (think about how many email newsletters or blogs you read today versus a couple of years ago). If you are at the top of your tree, it’s going to be an even greater advantage in the future, assuming you keep working to maintain your status.

Thanks to technology and its ability to analyze, aggregate and disseminate what the crowd consensus is, we’re going to rely more and more on what the greater majority of people “just like us” do. This won’t negate the power of the trusted expert, however people will increasingly look to what everyone else does to influence the decisions they make (social proof), if technology makes it easy to do so. If you own that technology, then you are in a very good position.

Building a technology driven community site that services a need can be the foundation of a successful online business, if you have a unique idea and reach critical mass before anyone else. If you’re creative, understand what people want, have access to the resources necessary to build the technology to make it reality, you might just strike it rich.

Yaro Starak
Maven

About Yaro Starak

Yaro Starak is the author of the Blog Profits Blueprint, a report you can download instantly to learn how to make $10,000 a month, from only blogging 2 hours per day. You can find Yaro on Facebook, Twitter and .

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32 Comments

  • Awesome article…and seemingly timely as well. I created a successful offline biz and I was wondering how to turn that knowledge into a successful business model where I can teach others my business. I, of course, thought of the this very thing that you write about.

    I hope that you have more on this subject so as to learn more. Thank you for a very enlightening article.

    Jae
    quickandeasymove.com

  • This is a really interesting article to read. For me I have been blogging for about 2 years and grown my readership to over 1,200 RSS subscribers.

    I think I am going to take the route of creating and selling information products. I am currently in the process of creating a variety of products now.

    Though I was never into Magic cards I know people who were, and this is a great example to use. Your blogging always inspires me to go bigger and better on my blog

  • Nicely done. I continue to think that sites such as Ning (http://www.ning.com/) where an indivdual, business or already established community can create their own social network will thrive. Sooner or later these self-contained communities will be a force to be reckoned with.

  • Nice Post Yaro! You hit so many important points but I especially loved how you talk about creating your own money from being an expert in your field!

  • Very nice write up and insights.

    I particularly like the reminder on social proof and authorities.

    I think “the chasm” also plays a role where mavens will be especially important during the early adoption gaps.

  • Great article, I now have a lot to think about. That’s why I like reading your blog, you inspire me. Way to go!

  • What an article Maven Yaro! You have blown me away.

    It had not occurred to me that email has lost out to facebook! I have been wondering why there is so much yak about facebook being a major threat to yahoo, Google etc and now it makes sense!

    Thank you for a very nice post.

  • Yaro,

    Great post.

    It is interesting that you talk about your cousin saying that e-mail is pretty much dead, and how Facebook has in a way taking over that role in terms of facilitating communication between people.

    The only reason I am still on Facebook is because FB acts as my updated contact list. Instead of having to make sure I have the updated e-mail addresses of those I know, I simply send them a msg on Facebook, and can be 99% sure they will receive it. In my opinion, FB is really a glorified contact book. Twitter may replace FB for those simply using FB like I do as a contact list.

    The funny thing happened when I joined Facebook… I started to add all these people I knew from high school, college, work….and at one point was well over 600+ “friends”, but after a while I realized why I lost touch with them in the first place…. we really never talked or had anything in common to continue the relationship. So, in essence is wasn’t a lost connection, but a valid non-connection in the first place.

    Today, I have pruned my Facebook friend list down to 140, and even then many of them are more acquaintances can true friends. I only keep a very tight circle of true friends which if I were to call them for a favor they would greatly extend their hand and I likewise.

  • Great post! Insular sites are great, but I sometimes think Facebook is still to big … there is a lot of spamming going in in groups now.

  • Great article, you really nailed it when you talked about Facebook. I agree with your conclusion. If you extrapolate this information then it means that Email marketing will be much less relevant and those who rely on the security of a big list will have to look to other ways to sustain their revenue.

  • Thanks for the sum up! You make them so nice.

  • Great article and great information. How about a product that shows us struggling mavens how to grow an online community from scratch and break into a niche, or break off a small piece of niche.

  • Thanks Yaro, I’ve always wondered what makes these kind of sites so successful, and today I’ve gained a little more understanding.

    But I don’t think it’s something many people can pull off. For one successful venture like Facebook or Youtube, there are probably hundreds or even thousands of ventures that failed.

    I feel that authority blogging (which you advocate anyway) is much more achievable for the average person.

  • Great article Yaro.

    I know someday I will find that certain product to strike it rich. Until then I just continue to learn and grow.

    Matt

  • Great (and long) post Yaro. I am also a owner of a forum that totally dominates it´s niche, it has been running for a few years and has thousands of users that has made over 1.000.000 posts. Some of the users has provided some really tremendous free content.

    I am going to launch more sites that are supposed to be running of user created content, It´s really interesting and they can grow extremely fast.

    And when they are up and running they don´t need to much attention.

  • RJ

    Very interesting article Yaro. Speaking of catch-22’s, when purchasing the forums how would you encourage participation? Wouldn’t a forum user feel like they were talking to themselves if they were the first poster?

    Until a forum has a couple hundred posts and is “broken in” there is a very good chance that it will quickly turn into a ghost town.

    The only way I can think of to really stimulate a forum is to create a few aliases and talk to yourself for a while with hopes that others will join in. It seems a little dishonest to me, but no other methods come to mind.

    Any thoughts?

    • I can think of two ways to populate a forum or other community site:
      1 (slower) establish yourself as an authority, and invite your following to join.
      2 (faster) JV with an authority and invite his/her followers to join.

      Make a few posts of your own and invite replies, this will also inspire more posts from members. You shouldn’t really need to develop multiple personalities to respond to yourself.

      Just my $0.02 worth

  • The thing that I most disliked about MTG was that every couple of years you can’t use certain cards that have not been reissued in a newer style. Sure you can use them in an unbanned play but usually those are for the major serious people that have cards that can kill you in like 3 turns.

  • I like your idea of creating a forum. Could be a valuable accompaniment to my business. It seems the key is to somehow synthesize content that establishes industry authority with user participation.

    I’ve been avoiding Facebook these days for the very reasons you mention. It’s great in a lot of ways because it helps you stay connected with people, but it’s so self contained, it gets to the point where I don’t even bother talking to people face to face, and opt for communicating via the online community. Oh, to find the balance.

    Thanks for the informative post. Appreciate the insight.

  • Good one yaro , the examples you gave in article are completely superb and relevant , Community is important for every successful business going to be online

  • I can’t believe this. I havn’t even got to grips with using email lists yet, as Yaro promotes in many of his video’s, and already its becoming outmoded technology!

    Lots to digest in this article and it certainly the need to keep your finger on the pulse and to be ready to adapt to the changing geography of the Internet and not get stuck doing things the same way just because it worked in the past. Thanks Yaro for the wake-up call.

  • I enjoyed reading this post I do agree with you when you say the people you should trust. experts and the crowd I like that and that is so true GREAT post!

  • I think you’re right that in the future “community” is the way to go. People don’t want to just read articles online, they want to interact.

  • Hey Yaro,

    Thanks for all the sharing.

    Enjoy reading your posting and articles from time to time. Not forgetting your newsletters which include up-to-date first hand informations and strategies.

    Hope to learn more from you..

    Derrick Ng

  • Hey Yaro,

    Thanks for all the sharing and tips! It’s really relevant, useful and up-to-date.

    Always looking forward to your newsletters.

    Derrick Ng

  • The key to building a successful self-contained community is building a strong early base and being prepared to work a lot of front.

    Early communities are small and lack critical mass. You have to provide that or people will see it and think… no one else here so it must not be that great.

  • Excellent article Yaro! I dabbled a wee bit in playing Magic, The Gathering with some friends, but the endless chase after rare cards and all the money spent on boosters that only added (maybe) one card to the deck put me off. Going online eliminates the killing of trees, and other associated pollution, so I really like that ;-)

    As for the rest of the article, I like how you led into the phenomenom that is facebook, and to a lesser extent other social media offerings on the web, and how they are self contained communities, requiring different points of access from what search engines offer.

  • You are right Yaro, the first to gain the critical mass, is likely the one that stays at the top, but like all other things… if someone has a better way of doing it, and they come in the right way, they can still beat the big dog. We have seen it before, when Yahoo was the largest search engine, but then all of the sudden an unknown Google came along and swept Yahoo under it’s feet, by providing a better service to it’s users.

    I personally watched a trend when myspace was beat out by facebook, about 3 years ago. At first facebook was only a place for college students like me, but eventually it branched out to high school students also being able to use it, and then everyone else could too. So it is definitely possible to beat out any big dog in a respective field, but you gotta be innovative and be that much better than your competitor.

    Till then,

    Jean

  • Great info Yaro, and very well put together. This is inspiring and will definitely be a bookmark to come back to. Lots of great info. Thanks for posting this with such clear relevance. Community involvement can play a huge role in the success of your business.

  • Hi, It is a nice post with have a good article related good info….

  • it is a nice post with a good topic related this nice article………..

  • I totally agree with what you said about Facebook traffic not needing Google traffic because they’ve got there own community. In fact, Recently Facebook has overtopped Google in terms of traffic.

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