Shady webapp business practice. Opinions?
Hi. I am a long time lurker.
Just as my username states, my business strategy is shady and I need your opinion on the ethics and practicality of the situation.
I am almost done creating a webbased service which is currently being offered by 1 major competitor (2 minor ones) at a licensing fee of ~$400/group. The functionality of this service can be easily replicated for ~$10,000 and maybe $5000/yr upkeep. It is catered to niche group. The major company is making ~4-5million in profits/yr.
My question: Is it ethical/practical for me to create the webapp and then contact the competitors in an attempt of being bought out. Do companies do that? Otherwise, I would offer the service as freemium and a premium mobile app with notifications. I would directly be taking away from the competitors since they haven't updated their product since 2001 and they charge money. This is my sideproject with only myself as an employee.
Do you contact the competition after creating the product or let the product speak for itself?
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http://www.google.com/search?sourceid=chrome&ie=UTF-8...
In fact, Google tried to sell to Ask.com early on, but they wouldn't buy.
http://www.techeye.net/business/google-wanted-to-sell-its-so...
Early on, the competitors probably wouldn't want to buy you, they'd probably just laugh and try to run you into the ground Microsoft style. The best way to get bought out is to have traction, existing customers, and a whole lot of potential for growth that you don't want to/can't deal with. That's when they'd buy you - when it's worth it to their bottom line in a very foreseeable way and when your product has been market tested.
In my opinion, I'd start selling and see what happens, if it's good enough you'll not only pay your bills, but the sale will be better if you can do so. Or, if you like it and you're talented/lucky, you could end up becoming the market leader and do really well for yourself. Like Google did.
I wouldn't bother contacting the competition until you at least pose a credible threat to them. Even then you're better off if they contact you. As somebody said "companies are bought, not sold".