Examples include Amazon, Instacart, and e-commerce, which share a
similar business operating structure. Another example is Google and
Perplexity, or YouTube and TikTok.
The reason for this phenomenon is often because the original market
is served by a monopoly. However, within that market, there exists a
smaller section—let’s call it a submarket—that is doing okay under
the monopoly but has untapped potential. If this submarket can be
served better, customers often have a strong demand and are willing
to pay for improved service.
A small company often enters the market much later than the big
competitor and decides to target this relatively small submarket.
They aim to provide better service to users within this niche.
Over time, it turns out that this so-called small submarket is
actually quite large and lucrative.
For instance:
- Instacart is competing for grocery delivery, which is a
subsection of e-commerce. - Perplexity is competing with Google in a specific area:
when users want to ask a question in a more natural way
rather than using keywords, and they want direct answers or insights. - TikTok is competing with existing creator platforms
but has focused on shorter video content,
which is cheaper to produce and potentially disruptive.
These examples illustrate how small companies can find and exploit
gaps in the market, delivering better experiences in areas overlooked
or underserved by larger competitors. Over time, these small submarkets
can grow into significant opportunities, challenging the dominance of
established giants.