Copycat Your Competitors to Take the Market
When Amplitude raised its Series A in August 2015, it announced a pricing change with the raise: Amplitude would be free for customers tracking fewer than 10,000,000 monthly events. In Amplitude CEO Spenser Skates’s words, “We’re giving away the same thing that Mixpanel charges $1,000 a month for” (emphasis added).
Mixpanel charges based on “data points,” with seven tiers ranging from free for 25,000 points to $2,000/mo for 20,000,000 points to enterprise pricing beyond 50,000,000 points. Data points are Mixpanel’s “value metric,” which literally describes the value that customers get out of your product.
By building the same product and making 10,000,000 data points free, Amplitude is putting Mixpanel’s business model and livelihood squarely in its sights—and trying to blow it up.
Amplitude is saying:
We think that our technology is a little bit better.
Therefore, we can provide the service for a little bit less cost.
We’ll get to market faster by building the nearly the same product as you have.
What you make money on, we’ll give away for free.
And that’s how we’ll win.
To founders who’ve been copied, the way that Amplitude is copying Mixpanel might sound very distasteful and weak. I used to share that opinion, but I’ve evolved my thinking about it recently.
Innovation means never wasting time reinventing the wheel. Step back and take the long view, and you’ll see that companies like Mixpanel copied as well, taking from Kissmetrics, Omniture and Google Analytics. The reason why startups can innovate is that they’re optimized for speed. If there is a hot product in the market, it can make sense to copycat it to move faster.
You only need to ask yourself one question.
Is there an opportunity?
Two Opportunities to Copycat
If you copy blindly, you’ll fail.
Copycatting is a means to an end, and that end is moving more quickly toward an opportunity. The question to ask yourself is: What opportunity can I move toward more quickly by copying an existing product rather than reinventing the wheel?
Copycat to shrink the market
If you look at a market landscape and notice a pattern of what everyone’s doing with their business model, you may have an opportunity to copycat. Become the opposite of the pattern, lead with that, and if you have a business model innovation that’s really unique, you’ll get massive leverage.
“Invert, always invert.” —Carl Jacobi
A common example of this was illustrated by the Amplitude vs. Mixpanel showdown above. Give away what every other company is charging for, and you’ll steal customers away from your competition. You’ll shrink the size of the market from dollars to pennies, but that’s great if you can take all the pennies.
This is exactly what Sean Ellis did with LogMeIn. At that time, all of the products to do remote screen sharing were heavyweight and cost a lot of money. Noticing that pattern meant that LogMeIn could go into the market and dominate by leading with a freemium business model and moving fast by not reinventing the wheel on product.
The size of the market shrank, but it was still large enough to build a big business around, the marketing got a lot easier and cheaper, and that made it possible to take a much greater share of the market.
Copycat to consolidate the market
In competitive markets, there is a lot of product overlap. It’s nearly inevitable that your product will be derivative of other products in the market and share a lot of the same features and functionality.
These markets are trending toward consolidation in the form of the all-in-one SaaS—the one-stop shop that bundles every tool you need to do your job. Your product is going to be a suite of tools, and that means it’ll necessarily look like a lot of other products. For example, Hotjar wants to provide every tool for website insights in one place, and it’s bundling together features from Crazy Egg, Qualaroo, ClickTale, SurveyMonkey, and Ethnio.
That means that if you want to grow, win the market, and be the all-in-one SaaS left standing you need to add more features, more functionality, and do more for the customer. Your product does more and more jobs. Doing more jobs drives upgrades, new customer acquisition, and growth. By copycatting a competitor’s features strategically, you eat their market share until you’ve gobbled up the whole market.
Back to Business Basics
Never hurt anyone. You should never lie, cheat or steal. For example:
- Do not propose an investor meeting to get intel on a company that you intend to copy
- Do not hack a company to look at their user data
- Do not rip a company’s HTML and CSS and pass it off as your own
Otherwise, it’s business.
We all want to win, and we all want to make money. We shouldn’t preclude ourselves from doing something great for our business based on an emotional response to copycatting or an opinion someone else will have about your business for copycatting.
I used to think of copying as just a bad thing, and I was close minded. I didn’t think about it enough to understand how it could help me. The big lesson for me is to withhold judgment and be more open to uncomfortable strategies and frameworks. That will help me grow as a founder.
SaaS has gotten so much more competitive over the years, and it’s only going to get more competitive. To win, you’re going to have to get aggressive tactically. For your customers, your team, and your family, you’re going to need to take the mentality that you’ll do whatever it takes to win, as long as you’re not hurting anyone.
What to Do When You Get Copied
Getting copied is a reality and it’ll happen, so you should be prepared.
When you find yourself on the other side of copycatting, just remember one thing:
Stay focused on your customers.
You have the best information on what the market needs, which you get from communicating directly with customers. That’s your advantage over a copycat, and you need to make the most of it.
How MailChimp disrupted its own business model by going freemium
MailChimp launched in 2001 and has been around for over 15 years. The arrival of the cloud around 2006-2008 could’ve disrupted their entire business by enabling a copycat to build the same product, on top of cheaper infrastructure, and give it away for free.
But that never happened, because in 2009, MailChimp turned its own business model upside down by going freemium. It created a free plan for up to 500 subscribers, a number that’s now increased by 4x to 2,000 subscribers.
MailChimp made the call by observing how the cloud was making its own infrastructure cheaper and analyzing the data it had on its customers that no one else had. Over the previous eight years, MailChimp had made multiple pricing changes and gathered tons of data on how that would affect revenue, upgrades, downgrades, etc.
In founder Ben Chestnut’s words, “When we launched our freemium plan in 2009, you betcha we used that data to see what would happen if we cannibalized our $15 plan.” The year they went freemium, they increased their paying customer count by 2.5x and their profit by a whopping 7.5x.
How Intercom builds with a jobs-to-be-done mentality
What makes Intercom so hard to copy is that it’s been created with a relentless jobs-to-be-done focus. Intercom built a single workflow for managing customer communications, through two core mechanics—people and conversations. Intercom’s specific products and jobs that it does—Acquire (live chat), Engage (marketing automation), Learn (in-app messaging and email) and Support (help desk)—all operate through that single framework.
Step back and look at the bigger picture, and you’ll see that Intercom’s framework gives it the potential to scale up to meet nearly any form of business communication with customers. And because the core mechanics are the same for each specific product, Intercom can also scale inside the organization to anyone in the company.
Contrast that with copycats that tack on an additional tab in the dashboard for each product that it copies.
That’s what makes copying Intercom as futile as copying Facebook. Intercom’s jobs-to-be-done focus has meant that it’s not just an app, it’s a platform.
Whether you’re copying or being copied, you’re in direct competition with another company, and that can be incredibly uncomfortable for most founders.
But that doesn’t mean you have to turn into a mean person or a bad person to compete. Don’t get angry.
Here are some resources and examples to get you started in thinking strategically about what you can do to win.
Free/freemium as a model
- HubSpot Website Grader: Took paid features of Moz and made them free as a lead generation tool.
- Sean Ellis, The 3 Keys to Success with Freemium
- Ben Chestnut, Going Freemium: One Year Later
- Chris Savage, “Monetize Backwards” to Build a SaaS Business That Lasts
- Hotjar: All-in-one analytics and feedback
- HubSpot: All-in-one marketing software
- Intercom: All-in-one for every customer interaction
- The Rise of All-In-One SaaS