Copycat in Software Industry

By Qingxi Wang

Copycat model can be good or bad. Some companies adopting ideas from others can succeed and benefit their users, while some can destroy the ecosystem of the software industry. There have been famous successful examples such as Google copying Yahoo and Baidu copying Google. Meanwhile, there are cases like Tencent copying ideas and business models from small companies. Here let’s discuss two issues: first, what can make a copycat model to be successful; second, what’s copycats’ potential impact on the software industry ecosystem.

First let’s take a look at the two most successful “copycat” software companies – they are Google and Microsoft. Google did not just copy Yahoo’s idea. It followed the simple idea to search the content on the web, but it has completely different infrastructures and ranking methods behind, and it was not very successful until the AdSense technology and business model was invented. In other words, Google has made many innovations which are much more valuable than the original ideas and succeeded because of these innovations. The case o Microsoft is similar. Twenty five years ago, Apple sued Microsoft for patent infringement. Microsoft could not have succeed without improving user experience and introducing innovations to ease the development of 3rd party software. The lesson we learn from Google and Microsoft is that many software companies generate value and therefore gain value themselves because of innovations and operations, rather than the original idea.

There is also another group of copycats like Baidu. They copy not only the idea, but also the business model and sometimes the techniques. Baidu’s success could be attributed to three factors: 1. Baidu focused on China market at first and did excellent localization work. 2. Baidu copied the correct model – there were several other companies had their own simple search engine at that time, but unfortunately, they copied Yahoo, which guaranteed them a failure. 3. Baidu knows its users better – not only the localization of language, but it also tried to make the ranking result to be helpful to the majority of China users. There is a similar localized search engine case in South Korea. Besides, Tencent is another good example from China’s software industry. They copied OICQ which you can hardly find a single user today, while Tencent has hundreds of millions users in China. In summary, even if a company does not own much technological innovation power, it can copycat and localize foreign products when there are language barriers and culture barriers.

Second, the abuse of copycat models could lead to monopoly and less innovation in software industry ecosystem. It is not bad when small companies copycat the ideas from bigger companies and try to extend the business in a specific area. However, when big companies start to copy small companies, it tends to end up in monopoly. Tencent, the instant messenger company mentioned above, owns lots of business in varies sectors, such as game, twitter-like website, download and download tools, search engine and so on. Back in 2003, Tencent only has its messenger and peripheral products, but it had a large group of user, estimated to be more than 100 million. At the same time, there was an entertainment company called LianZhong which had online card games in China. Tencent observed the success of LianZhong and created an online gaming system which has the same feel and looked exactly same as LianZhong’s product, register-free for Tencent users. The market share of LianZhong fell from 85% in 2000 to less than 1% in 2010, while Tencent is almost the only service provider in this domain. Tencent repeated this strategy several times – it copies others’ successful model and makes it easy to reach by their users – and just like pirate software, this behavior has undermined the innovation in the industry. Nowadays in China, there is a tendency to copy all the innovations in the US and see if they work in China. This undermines the innovation power.

To sum up, innovation is the most valuable assets in software industry. The copy of an idea is often not the problem. But if one is copying the whole business model and strategy, there is a risk of stopping innovation.


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