Fribble Monday, January 10, 2000

Stuck on You...

By LeiLeiPhase2

I was attending an Internet workshop in Aspen, Colorado this summer when a great debate broke out between a private equity guru and a Wall Street analyst over the future of Amazon.com. The private equity man refused to believe that the online retailer could endure as a worthy investment. He made some very good points, eventually convincing the crowd that Amazon, no matter how hyped, lacked the core competencies needed for long-term value-generation.

I left the conference convinced that the barriers of entry in Amazon's industry were little to none, and that the company really did not have lasting competitive advantages. The Wall Street analyst's comments, especially the ones about the "stickiness" of Amazon's website, left me amused and unconvinced. What was this "stickiness," and could it really be considered a viable barrier of entry for Internet companies?

Before I continue, let me try to define "stickiness." The concept describes a website's ability to retain a loyal customer base. The longer a website can hold a customer's attention, and the more repeat hits the website receives from that customer, the stickier the website is. As the customer becomes loyal to that website, his costs of switching to another website increase to the point where it would be economically impractical for a competitor to try and lure that customer away. Thus, a barrier of entry is created� but I was still skeptical.

When I began to seriously explore The Motley Fool this fall, I realized that, indeed, a concept as theoretical-sounding as "stickiness" is very real. The Fool, through its multitude of features -- such as interface customization, "Favorite Fools," user interviews, Recommended Posts, Hot Topics, and, of course, the message boards -- has created a virtual community that very few want to leave, and almost no one can emulate. Yahoo's financial message boards are an uncivilized mess. Other reputable firms have tried to set up interactive financial communities, but none even come close to matching the breadth and depth of the Fool. Why is this? Simply because the Fool, through its stickiness, has created a loyal customer base of investors who are too hard to lure away!

Stickiness, once only a silly buzzword in my head, does exist, and creates a serious barrier of entry for competing Internet companies. However, does it exist for Amazon.com? Even with all of the features Amazon has implemented to encourage community, I remain dubious about the company as a long-term investment. What prevents shoppers from using Amazon's great reviews and services, only to order from Barnes & Noble or Books-A-Million (who have excellent delivery services as well)? But that's an argument for another day. The stickiness of Fooldom is calling me!