Recently, we've been absorbing and reflecting on the emerging science of networks. It appears that there are network related principles that underlie the structure of biology, electronics, human personality, social environments, power grids and physics. Bridging complexity and fractals, network science, which is in the earliest stages of development itself, suggests that many phenomenon can be explained by looking at the nodes and links that comprise some form of underlying network.

The Internet itself gives substantial credence to the idea.

There seem to be a number of repeated patterns involving the development of linkages between sites and relative market dominance. Rather than the 'first mover advantage' that was proclaimed so heavily in the dot-com days, it appears that market leadership is a function of connectedness (traffic plus inbound links) and fitness (suitability and reliability for a specific task). 

In niche after niche (think Yahoo, Google, AOL), we see a player with traffic and revenues that are four to ten times the closest competitor. Generally, there is a cluster of operations at the second tier. The third tier is composed of twenty to a thousand businesses that are generally one fourth to one tenth the size of the second tier.

That just may be the market structure for businesses in a networked market. Dominance is traffic, revenue and inbound links. The maintenance of dominance involves continuing to be the fittest for the task. The dominant players currently appear to be Monster, Salary.com, Recruitsoft, RecruitUSA, Adecco, Brainbench and a couple of others, each in their own niche.

For the second tier players, there are two choices (none of them include price wars): expansion of the dominance characteristics (larger sales forces, advertising and linkage development) or radical improvement of their suitability for the task.

Google displaced all of its earlier competitors by focusing on fitness and customer experience. This is the approach being pursued by IIRC, Hire.com and, we think, Manpower. It's well worth reading up on Google's various initiatives as it displaced the "first-mover" incumbents.

All is not lost for the second and third tier players. It is entirely possible to build a handsome, profitable modest-growth company based on a firm grasp on the second or third tier. It takes a super-human effort to displace the market dominators (although some second tier players are closer than others). Clearly understanding that market dominance is tied to customer satisfaction (both at current levels and at beyond the current market levels) is essential to any strategy that supposes to unseat one of the dominant players.