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Corner the Virtual Market

Establishing a Net presence can help you hoard market share.

How many businesses would like to dominate or outright own their market space? All those high-tech companies that testified against Bill Gates and Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Report in Congress would all like to be sitting in Gates' seat.

Aside from Bill Gates, the late John D. Rockefeller, former chairman and CEO of Standard Oil, and Thomas Watson Sr., former chairman and CEO of

IBM

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, no one else has dominated or owned their market space. With the advent of the Internet, new entrepreneurs are displacing old market leaders.

Three years ago, how many people had heard of

Amazon.com

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,

Yahoo!

(YHOO)

or

Google

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? Amazon has hit $10.7 billion in sales. Google has reached more than $8 billion in revenue and Yahoo! is at the $6.4 billion mark. More importantly, their value in the stock market is greater than many large-asset companies.

Suppose you own a regional hardware store and you are wondering how you can leverage your industry knowledge and regional contacts to take advantage of this new medium.

There are two ways you can own your regional market space. First, you develop the first Web site in your industry for your region promoting your business. Second, you can develop a destination Web site for you and your competitors to be a part of.

Right now, you are wondering, "Why would I develop a Web site that my competitors can be on? I thought you said I would own the market. Allowing competitors to be on the same site as me will cause me to lose business."

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Not necessarily. If you own a hardware store, you are competing against numerous small and chain hardware stores, and you are probably advertising in the same local newspapers as your competitors. Why not develop a Web site called "ChesterCountyHardware.com"?

You know all of the items a hardware store carries and you know all of your competitors. You develop a site where the user types in what they are looking for -- a chainsaw, for example. The site is connected to the computers of all of your competitors and it shows the user which store has what chainsaws, the prices and pictures of the chainsaws, and it lists the chainsaws by price.

You, as owner of the site, charge each hardware store a fee to be on the site and a percentage of each item sold. The beauty of owning such a site is that you make money even if you don't get the sale. As you are reading this column, you might be asking yourself the following questions:

Don't I have to know a lot about technology and the Internet?

Don't I need a lot of money to do this?

How do I know someone isn't doing what I am thinking already?

First, you don't have to know a lot about technology, but you should spend some time on the Internet so you understand how powerful this new medium is and how it works.

Second, you don't need a lot of money to get started. You probably can develop a reasonably good site for $25,000 or less. If that sounds like a lot of money to you, don't let that scare you. There are many ways to raise the money, such as private investors, state grants and a partnership with Web site developers.

A client of mine is developing a site for the financial field and has partnered with a Web developer. The developer is getting equity in the new venture in exchange for his services.

Third, if someone was doing your idea you would have been contacted about participating or read about it in the local paper. You can always check on the Internet to make sure you're the first with this idea.

Here is what you need to do to own your regional market on the Internet.

    Develop a short business plan outlining what would be on the site, the type of questions customers typically ask and the advice they seek.

    Give the plan to a few Web site developers and ask them for a quote on the cost to develop and maintain the site.

    Contract a Web developer to create a prototype site.

    Develop a sample pricing model.

    Go to competitors and see whether they would be interested in participating.

    Don't say it can't be done, because entrepreneurs are doing this every day, except most of the Internet ventures are developed with a national focus in mind and taking the company public. Your goal could be to provide a nice monthly, quarterly or annual dividend to your investors. The longer you wait to pursue an Internet enterprise, the greater the chance you will be the one approached about participating on someone else's site.

    Kramer is the author of five business books on topics related to venture capital, management and consulting. He is a faculty member at the Wharton School of Business at the University of Pennsylvania and the veteran of over 20 startups and four turnarounds.