A lesson learned from Lavalife: domination can be broken

SlingRide was asked: “What’s been your favourite JOLT session/workshop so far and why?”

If you look at the historical growth of instant messaging networks such as Windows Live Messenger, GTalk, and AIM on a regional basis, you’ll see an interesting trend. For the most part, one community over time dominates a given region or country; a sort of local-winner-takes-all phenomenon. This kept us up at night because, although we thought we were were actually solving problems for users better than anyone else, the network effects generated by incumbents are an all-powerful force in the universe, impossible to overcome. Enter Bruce Croxon.

In the late ’90s Croxon was riding high with Lavalife. We didn’t know this, but having been the first of its kind in the world (let alone Canada), there were many years where Lavalife effectively had 100% marketshare. At the time, Lavalife was a sort of “horizontal dating site” with services for segments ranging from “casual to intimate encounters.” A suitor would simply enter the site, and reach out to other users. In 2000, a competitor called eHarmony entered the market with a different model. Focused exclusively on “serious encounters,” users would create profiles and answer a survey so that eHarmony could help you find the perfect match. eHarmony started to eat Lavalife’s lunch.

The lesson is this: The winner in a fight between a bear and an alligator depends on where the fight takes place (the water or the trees). eHarmony entered an expanding category (online dating) with a huge incumbent (Lavalife), but did so successfully with a product targeting the needs of a specific segment of users. So, even though the gravity of network effects in a product category are immensely powerful, they can be broken by delivering experiences catering to a specific segment.