Amazon got into this position by starting out first, call it “first mover advantage” or “path dependence.” Catching up is difficult because Amazon has built the network effect where “the more you sell, the more you sell.” Google has this advantage in search, Microsoft has this advantage in Windows and Office, but that does not translate into advantage in Cloud. Amazon conquered a virgin field. Google, Microsoft, et al, have to compete with a well established provider.
I want to ensure we separate First Mover Advantage from the Network Effect. First Mover Advantage is highly overrated and very often misattributed.
Microsoft was not the first mover on a GUI-based OS, nor were they the first to market with an office productivity software suite. Apple did not invent the MP3 player, the touchscreen phone or the smartphone. Google was most certainly NOT the first mover on internet search. Amazon was neither the first online retailer nor the first cloud storage provider. But they did “it” better … and often with the Network Effect.
These companies actually enjoyed a Second Mover Advantage. The second movers don’t have to create a technology, product or market from scratch. They can let the pioneers forage a trail into the wilderness, then come behind, learn from the pioneers’ mistakes, pave the trail and expand it further … because by that time the true pioneers have died from disease, arrows or some other malady featured in Oregon Trail.
That’s not to say first movers can’t be very successful and profitable; one can certainly list examples of those. But being the first mover provides no moat by itself; in fact, it can just as often be a First Mover Disadvantage.
The Network Effect, on the other hand, can be a HUGE moat. It often differentiates the first mover from the “first succeeder,” as JoeG described.
They call me,