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Five Forces and The Fray
Sep 16, 1997 :: Michael Sippey

Today, September 16th, is the first birthday of the fray, the much-feted site produced by Derek Powazek. To celebrate, Stating the Obvious offers up this strategic analysis of how the fray has managed to compete and prosper in the crowded field of "personal narrative" publishing.

As a full-time student of capitalism, I spend a good amount of time looking at the world through lenses tinted with a decidedly green hue. I thought it would be interesting to systematically examine why the fray has attained and can sustain such high levels of success. And as any middle manager knows, there's no better way to do that than through a traditional Industry Structure Analysis courtesy of Harvard Business School professor Michael Porter.

Porter's Five Forces are supposed to be applied by an analyst when he or she is examining an entire industry. But Porter's basic framework is also commonly used as a quick and dirty way to understand the competitive winds and industry pressures that take their toll on an individual venture -- even one that has as its major product categories Criminal, Hope, Work and Drugs.

Force I: Rivalry Among Existing Sites

"Rivalry among existing competitors takes the familiar form of jockeying for position -- using tactics like price competition, advertising battles, product introductions, and increased customer service warranties." -- Michael Porter

The first force that Porter advises the manager to be wary of is internal rivalry, or competition amongst direct competitors. The fray seems to have plenty of competition to contend with, but most of those competitors are really just imitators. The true beauty of the fray, versus the slew of personal diaries and online ramblings, lies in its collaborative nature. Without the excellent writing, the design would mean nothing. And without the design, the stories wouldn't be as powerful. There's no single author that can do the same thing that Derek has done with his contributors.

Force II: Threat of New Entrants

"The threat of entry into an industry depends on the barriers to entry that are present, coupled with the reaction from existing competitors that the entrant can expect." -- Michael Porter

Just as the tray has spawned imitators, I expect that there is a mild threat from new entrants. Newcomers to the web will certainly explore its opportunities for personal expression. After all, barriers to entry are low (hosting on GeoCities are free), and there are eight million stories in the Naked City.

The fray is fairly well positioned to defend itself against new entrants. The site's reputation for high quality personal writing will only help attract even higher-quality writing to the site. Oh, and all that glowing press coverage doesn't hurt, either. The only reason for concern is the physical bandwidth of Derek; reading, reviewing, editing and administering the fray is a time-consuming labor of love, and too many submissions could be the site's kiss of death. To sustain his competitive advantage while staying reasonably sane, Derek should work to outsource more of his editing and design responsibilities through joint ventures with other web talent.

Force III: Pressure From Substitute Products

"All firms in an industry are competing, in a broad sense, with industries producing substitute products. ... Identifying substitute products is a matter of searching for other products that can perform the same function as the product of the industry." -- Michael Porter

Since the fray traffics in "personal narrative," potential substitutes abound. These could range from your kid sister's diary with the cheap brass lock to the widely distributed sexual ramblings of Anais Nin. The fray, of course, has an advantage over these substitutes -- after all, you can't really read your sister's diary or Anais Nin at your desk on Monday mornings. The fray also provides a unique way for readers to interact with the content (through message boards) that are unavailable in potential substitutes.

Force IV. Bargaining Power of Buyers

"Buyers compete with the industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other -- all at the expense of industry profitability." -- Michael Porter

Buyer power is negligent when it comes to the fray, or any other venture which never intends to see a dime of revenue. There are no "buyers" of the fray: advertisers aren't invited to the party (although with a reported 30,000 hits a day, Derek might want to rethink his strategy), and users aren't being offered fray memorabilia, such as coffee mugs, T-shirts or original artwork straight from camp fray at Burning Man. If Derek ever does decide to cash in on the fray's considerable brand, I'll of course have to revise my analysis.

Force V. Bargaining Power of Suppliers

"Suppliers can exert bargaining power over participants in an industry by threatening to raise prices or reduce the quality of purchased goods and services." -- Michael Porter

In the fray's case, suppliers are essentially the writers who provide content and design to Derek for inclusion in the fray. With the fray's tremendous brand reach and reputation, it would seem that contributors hold very little bargaining power over the fray. However, there always exists the possibility, however slim, that an actual market (that pays actual cash) will develop for producers of personal narrative. Whether that market is supported by advertising, subscriptions or micropayment schemes is yet to be seen. Those who scoff at the idea of paying online writers for their 1,000 word ruminations on love, jobs or suicide would be well advised to keep in mind that guests on the Jenny Jones show are paid whether or not they can string together even one coherent sentence.

In summary, the fray is well positioned to take its success into the next year of operation and continue producing breath-taking work.

Happy birthday, Derek.


This piece has been prepared for purposes of online discussion, rather than to illustrate either effective or ineffective handling of an administrative situation.



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