Lessons you can learn from Automattic And Vertical Market orientation


In the middle of 2012 I made the prediction to a friend that Automattic, the company that powers WordPress.com, would need to look at specialized solutions for target markets. After all, while they were on track to generate over $40MM in revenue, the cost of doing so included hosting some 32MM web sites. So my guess was that they'd start looking at vertical solutions.

A few months later, WordPress.com started offering a focused solutions for weddings. Then, a few months later, they delivered targeted solutions for restaurants. And just recently, they started talking about portfolio solutions for folks like photographers and designers – the artist vertical.

So yesterday when my friend and I caught up (after several months) the topic resurfaced and he wondered aloud if I had secret insight into what Automattic was doing. The truth is that I didn't (nor do I) have any special insight into what Automattic's future plans are.

But I do know a little something about vertical markets.

If that phrase (“vertical market”) doesn't mean anything to you, that's ok. Don't worry. I'll explain what I'm talking about. If you think about technology solutions, you can imagine some that everyone needs. Email is a perfect example of this.

Everyone, in every industry, needs email. And email doesn't have to (for the most part) have any special industry features to be valuable. We'd call this technology a horizontal solution. It spans all industries. WordPress.com is another horizontal solution that crosses over different industries and can be used for any of them – as is. But that's not the case for all software.

Some software is specialized for the industry to meet specific requirements. The industries themselves are called vertical and the software that is delivered to those target markets are also considered vertical. Another way to say it is that the software is specialized and customized to meet the specific needs of that industry.

Emphasys Software, where I work, is an enterprise software company that delivers solutions to several different vertical markets (or targeted industries). And I've been building vertical market software for almost two decades, so like I said, I know a little something about vertical market software.

Why are vertical markets so attractive?
I'll give you my three favorite reasons. 

  1. Once you spend the time getting to know the custom and specific requirements of an industry, it differentiates you from general (or horizontal) players in the market.
  2. The barriers to entry for others to get into the business you're in is much harder because it's not just about software features, it's about learning the details of an industry (which can often be complex).
  3. Once you deliver great value to one customer in a vertical market, their referral is strong and useful as you approach another customer in that same market.

So when we see an organization like Automattic create targeted solutions for weddings, restaurants and artists, should we be surprised? Not at all. If they're smart, and every sign suggests they are, they'll keep doing it.

They'll step into several more vertical markets offering targeted solutions that drive them “closer” to customers. After all, they're looking to generate revenue and if a vertical market orientation allows them to leverage referrals more effectively, why wouldn't they want to leverage that effect?

Why you need Vertical Market Orientation

Can I ask you a personal question? It's about your health. If you were having really bad problems with your voice, would you go to a general doctor, or try to see an ear, nose and throat (ENT) specialist? I bet you'd look for an ENT, right? You know why? Because they specialize. Now think about it in terms of your business – whatever it is that you do.

What's more powerful to say?

  • I build web sites.
  • I build web sites using WordPress.
  • I build web sites for female entrepreneurs using WordPress.

I bet you picked the last one, right? Because it was more targeted. But imagine how much more powerful it would be if you went even further to define what kind of entrepreneurs you were focused on. And here's the truth you need to know.

Different verticals have different needs.

If you're focused on female entrepreneurs that are running a retail massage therapy business what do they need? Scheduling. But not necessarily e-commerce. But if you're helping female entrepreneurs that are crafty (quilts, sweaters, etc) you may never need scheduling. But e-commerce would be logical and potentially essential. And if you focused in the educational space, you may not need much scheduling or commerce but membership and e-learning might be requirements.

Vertical Orientation helps you focus.

I know it's exciting to say yes to everyone. But you'll limit your ability to maximize profits and referrals will be harder. Telling a doctor or lawyer that they can trust you because you just finished the site of a rockstar won't help you much. So learn from Automattic and find a few verticals that you're ready to invest in and jump in with both feet. Learn all you can. Over time, add a few more. And after a few years, you'll be amazed to see how powerful it is to leverage a vertical market orientation.

When you start closing business faster, you can come back here and thank me.