SmoothSpan Blog

No, I’m not calling commoditizers fairies are even trying to be derogatory, it was just a title that seemed to work at this time of the year.  What it’s about is that we’re seeing some fruits of the Web 2.0 tree ripening enough that the commoditizers see an opportunity.  What does a commoditizer do?  They follow the innovators in the food chain and ensure broader availability of the innovation.  That’s the commoditizer elevator pitch.  Typically they do this in at least four ways:

– They offer alternatives to the Innovator’s product, thus ensuring competition.

– They undercut the Innovator’s pricing, which leads to broader availability for all.

– They enable white label versions of the innovation, which essentially lets many others use the innovation as their own platform.

– They broaden the category to niches that may have some special requirements.

This is good stuff in a market.  It reflects that enough value has been recognized around an innovation that it’s time to take it to the next stage.  The Innovators will frequently view the Commoditizers as late-to-the-party freeloaders who just want to cash in on someone else’s idea.  In part they are correct, yet the broader markets and user bases benefit greatly by not having an idea totally locked up in the Innovator’s hands.

So who are the current crop of commoditizers commoditizing?

– Ning hit the Facebook/MySpace world.  They’re in my third and fourth categories as white labelers who are also catering to niches.

– Fraxi is trying to commoditize the world of Digg, just at the time when Digg seems to have stopped growing so much and is evidently trying to sell itself.  Fraxi isn’t out yet, but looks like a white label play.

– Video seems to be going crazy with commoditization.  Everywhere you look someone is announcing a new video service or adding video to their existing service.  This may presage a broader commoditization of media on the web.  Consider the willingness of the TV industry to experiment with it after watching the fate of their record company brethren.  RadioHead made news and shows the future here by offering their latest album and letting the buyers decide the price.  According to the band they made more money out of that release than all of their prior releases combined.  Companies like Scoble favorite Kyte (just announced a $15M Series B) are raking in the VC.  We’ve heard all about Seesmic and now there’s a company called Magnify that may be trying to steal some of their thunder.  Yep, video is definitely in the commoditization phase.

– Even in cloud platform land, a relatively new area, commoditizers have shown up.  Intel is staking Nirvanix, which offers an alternative to the Amazon S3 storage service.  I might add that the whole Amazon approach is more or less aimed at commoditizing data centers and hosting.

There are lots of other good examples kicking around out there in your RSS feeds. 

What does it all mean?

First, it’s clearly a good thing in the short run.  It means more choices and lower prices for customers.  That’s always a good thing to inject into a market.  Second, and this latter is much more speculative, it is a sign we might be involved in a little less bubble than may have been thought.  How can I possibly say that in the wake of $15B Facebook valuations and all the rest?  The short answer is that I can’t with any certainty, but we’ve entered the litmus test phase for these areas.  The initial successes are there.  Facebook, MySpace, YouTube, and even Digg all count.  We’re now in the phase of seeing if the commoditizers can make a go of it.  If some of them start to be successes in the same way the Innovators have, that’s how we’ll know we’ve got real markets and not just a bubble.  The reason is that the only way commoditizers survive is that they open things up to moving the market across the chasm.  Yes folks, you can’t support a ton of commoditizers with early adopters.  Commoditization requires real demand.  Real success for that category means we’re past the early adopter stage and a much more difficult and much larger market has been engaged.

We could still falter, especially with the economy the way it is, but I see some world changers out there, and I’m rooting for the commoditizers to take hold.  The other benefit of all this is that eventually it will signal that it’s time for another punctuated equilibrium and a new set of innovators will be empowered to bring us the next wave.  It’s hard for that process to get underway until the world has digested the current innovation crop and has room to look at something genuinely new.