The Ultimate Guide to Verticalization

Series: Let’s talk about Trends in Startups

Episode 1


Background

Everyone is talking about Verticalization these days. At first, I didn’t understand why this trend is happening because at first sight, it doesn’t make sense. However, it is one of the most important recent developments in the tech landscape and this is why I chose this topic to be the first one in my Startup Trends Series.

Definition (in Product Terms)

Creating specialized niche products (Verticals) instead of “Does-Everything-Products” (Horizontals).

  1. Verticals serve small niche markets and a specific target group instead of serving everyone.
  2. Verticals are often broken-down versions of former Horizontals.
  3. Verticals are ideally better at what they do than a Horizontal that offers the vertical offering as one feature.

Examples

  1. Facebook creates an own app for its messages (Facebook Messenger App) instead of letting users message within the Facebook App.
  2. Foursquare splits its checking-in-feature off, creating Swarm.
  3. Dribbble was built for designers to show their work, not for everyone to show their work.
  4. Algorithmia aims to be the app store for algorithms, not the app store for every app.
  5. Togethera wants to be the social network for families, not the social network for everyone.
6. The best example I came across which shows that Verticalization has been happening for a long while already, is Craigslist. Inspired by a great blogpost by Andrew Parker, I created this chart (contact me if you want the original) to show how Craigslist has been verticalized:

Why is this Trend happening?

  1. Vertical products simply work better because they focus on one aspect whereas Horizontals focus on a hundred aspects. As always in life, focus is very important for getting very good at something. Example: Nobody can be the best soccer player and the best basketball player at the same time because competitors who focus on only one thing have twice as much time becoming better at it. Exceptions to this rule: Shaun White, Elon Musk, Jack Dorsey & Kevin Rose.
  2. Mobile: As everything is shifting to mobile, and thereby to apps, multitasking gets easier. It’s often faster to switch between different apps than to navigate within one app.
  3. Specialized products attract specific communities and communities are always more engaged when they are small and specific. Example: Stackexchange vs. Ask.com. Communities can only thrive if they attract engaged users because this is what creates network and lock-in effects and these effects are, by the way, what VCs look for.
  4. Reducing complexity and minimalizing design of products has become a mandatory criterium for success. Obviously, this is more easily achievable with Verticals.
  5. People are overcoming signup barriers more easily than in the past. Signups are becoming faster, easier and more seamless and therefore, it is less of a problem to get users for a new product.
All the different Verticals offered by the Q&A Platform StackExchange.

So what does this mean for you?

  1. It has never been easier to build a company because all it takes is finding a little niche and creating a simple solution for it.
  2. Don’t try to build The One and Only Search Engine for Everything and Everyone. Instead, build The One and Only Search Engine for Dog Food in Thailand.
  3. Just take some feature that a big horizontal product provides and build that one feature new and better. Example: Facebook Groups. Basically every group that exists in Facebook could be an own social network (Your group for your soccer friends, your group for your neighbors, your group for your drinking buddies).
You can tackle small problems one by one!
  • Everything must be seamless! Build tools on top of existing solutions to make them better. Example: Brisk.io on Salesforce (“Salesforce on Speed”).
  • Everything must be integrated with each other! Luckily, there are Verticals taking care of that (If This Then That, Zapier, …)

I hope this was helpful and I wish you all the best,

Simon

Read more about Startup Trends by clicking here.


Cover image credits: http://superfamous.com/

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