Horizontal and Vertical in prediction markets
August 31st, 2007
I’ve read posts recently by Brad Feld and Sigurd Rinde that discuss horizontal versus vertical markets. This discussion seems particularly relevant to prediction markets.
Brad Feld writes that he loves to get involved with companies that develop horizontal technologies. Specifically,
I personally revel in the tension between engineering, product marketing, and sales. It’s challenging to sell a horizontal product in an emerging market, especially to enterprise buyers. You need a special type of salesperson – one who doesn’t constantly say “I can’t sell that” but instead knows how to ask his early adopter customers “what is your pain around [problem category X]?” and then figures out how to repurpose the horizontal technology to solve this pain.
In a well functioning early stage team, this tension between engineering, product marketing, and sales results in customer driven vertical market segmentation. Rather than having a top down sales effort to “go after the following five vertical markets”, the use cases evolve and the ripe vertical markets become clear.
Sig follows up with:
I can “see” how the “broad horizontal technology” is left spreading slowly over the horizontal plane until it finds cracks of specific needs, the verticals where it can freely flow into. Cheaper, better, efficient, unobtrusive, smart as methods goes.
This is exactly what we’ve seen in the prediction market industry, and it’s an efficient model. Prediction markets are used horizontally in a number of different industries. Pharmaceuticals, manufacturing, R&D, retail, and more.
However, as the industry has started to mature, more vertical markets are developing. Pharmaceuticals in particular have really taken up prediction markets, as their exposure to risk is so large that even marginal improvements can save significant costs. Major banks have the same issues. The Hollywood Stock Exchange has had great success in using their platform for a variety of media-related prediction markets.
I think prediction markets are starting to see a turning point, and this will develop in the next few years. As one company in a vertical market gains a competitive advantage through introducing a prediction market, other companies will follow. The key for early adopters is to be just that: on the leading edge of the technology and implementation.