Friday, March 24, 2006

37signals' Tenuous Front-Runner Status

Web applications company 37signals is blowing their lead. They sell their products as if they are some great value added product. Not really. In the long run, they are mostly selling bandwidth to help their customers connect with employees and customers. Basecamp, Backpack, et al are commodity products -- relatively easy for any competent web application shop to replicate. Just think what would happen if Microsoft, Google, or Yahoo began to offer a collaborative to-do list, or project collaboration and management software --37signals' profit margins would get crushed. Since they still have "first mover" status, they should exploit it more: Sell this product to other web hosting companies, sell it as a standalone product to be run on company-based web servers, establish an affiliate program.

In general, I think people would rather not pay recurring fees for project collaboration or information organizer software, once someone else offers a similar product for a one-time fee, 37signals honeymoon will be over.

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