This was a great story about how Google’s search distribution deal dramatically increased cost of entry for Neeva, a putative competitor.
This also reminded me of the Monster/AB InBev deal mentioned in “The Little Book that Builds Wealth:”
To be fair, it is occasionally possible to take the success of a blockbuster product or service and leverage it into an economic moat. Look at Hansen Natural, which markets the Monster brand of energy drinks that surged onto the market in the early part of this decade. Rather than resting on its laurels, Hansen used Monster’s success to secure a long-term distribution agreement with beverage giant Anheuser-Busch, giving it an advantage over competitors in the energy-drink market.
Anyone who wants to compete with Monster now has to overcome Hansen’s distribution advantage. Is this impossible to do? Of course not, because Pepsi and Coke have their own distribution networks. But it does help protect Hansen’s profit stream by making it harder for the next upstart energy drink to get in front of consumers, and that’s the essence of an economic moat.
Once you find product-market fit you need to quickly scale distribution to own as much of the market as possible and preempt new entrants.