Here's an example from Brad:
Vertical specialization is different. Service Magic took the notion of a generic buyer / seller marketplace and applied it to an ecosystem around home ownership (contractors first, then home buyers / real estate agents, and finally mortgage financing.)
Let’s look at Golf as an example (duh!). If I am searching for a golf course - let me book a tee time or see all the others in the area.
Yahoo and Google seem content to leave this area alone for now. I think that will change very quickly. Those that can build out a nationwide business in vertical markets are going to be very well rewarded.
On behalf of GolfNow.com we are accepting bids for $100 million to enter the vertical market of golf tee times
I can think of a bunch of applications that fit this profile. Ebay, Elance, Monster, Amazon and Ticketmaster are horizontal applications that span verticals. There are a lot of lead generation companies that focus on a specific market: My local Worcester landscape guy just told me about a landscape ERP software company that is launching a national brand by letting local landscapers buy the rights to a zip code. David Beisel mentions Rent-A-Coder:
As Rentacoder has demonstrated, this level of is engagement is possible by assuming the risk of the transaction, which gives both transacting parties the comfort in "paying" for the introductory services in a substantial manner.
Howard Lindzon makes the point that connecting search with a transaction is the holy grail:
I am no visionary, just a trend follower, but the “last transaction mile” makes sense to me. There are going to be hundreds of acquisitions of vertical specialization companies in the coming years. I hope/suspect that Google and Yahoo will be the big acquirors. Let me explain…
For that matter, connecting any kind of online traffic generation technique with a specialized transaction, creates a valuable company.
Brad Feld makes the point that this isn't about just applying the "hot" trendy tools w/ to a specific "audience". An audience specialization does not a marketplace make.
Vertical specialization doesn’t work if your underlying horizontal technology doesn’t work. So – when you hear someone talking about how they are doing “vertical search applied to market X” or a “vertical social network for category Y”, dig deeper and find out how they are actually doing it and whether the underlying technology will work at scale.
David Beisel makes a similar point in a recent post:
The real opportunity here is in the business model itself – not just providing paid advertising listings (or even contextual relevant advertising adjacent to the listings themselves), but rather actually participating in the transaction as a percentage fee. The more intimate the relationship these marketplaces play in the transaction, the greater the value they can capture from it.
Ben Barren makes an interesting point that geography could be a vertical.
You can go vertical by selling to your own backyard geographically and calling it a vertical search strategy :)
I don't think this is right. But, based on my experience with WhizSpark, I'd say that local is a great proving ground to test the scalability of a vertical application on a focussed market, such as our focus: local business networking events and business skills seminars.
But, as David and Howard point out, owning the platform where a transaction occurs is critical. In our case, we faciliate the registration process between attendee and event producer; the promotion process between an affiliate and the event producer; and the sponsorship transaction between the sponsor and the event producer. Focussing on public events for business professionals is certainly a large healthy market, especially after we expand past our home base. But, the transactions we faciliate can certainly be apply to all kinds of events. There's value in market focus, though. Especially, in the beginning.