First-Mover Advantage (FMA)

First-Mover Advantage (FMA)

Community Submission - Author: John Ma

The first mover advantage refers to the competitive advantage of the first project to bring a service or product into a new and unexplored market or industry. By virtue of being the first to launch, there is an uncontested opportunity to establish brand recognition, market share, and consumer loyalty before other businesses and products eventually enter the space as competitors.

Such an advantage is notably important in the cryptocurrency industry, as blockchain-based projects and cryptocurrencies exchanges compete for the relatively limited market share and user base. Because these companies and their networks are directly dependent on their visibility and reputation, capturing a large user base at early stages can make for a significant lead. 

Concerning cryptocurrency exchanges, the migration from an established trading platform to another involves transactional costs and also some risks. This may be one of the many reasons users are not always willing to change from their current exchange of choice to a newly launched one - especially if the services provided are reliable and efficient. In other words, a company that is not a “first mover” will need much more resources and energy to “convince” users to migrate.

However, being a first mover has its own disadvantages. Before the reputation and user base is eventually established, there is no guarantee that the product will be favorably received. Consumer sentiment can be both positive or negative, and if the company fails to provide a secure and valuable service or product, there will certainly be a feeling of deception among its early adopters.

In addition, being the first mover of a particular market often implies that they have to deal with the additional cost and overhead related to unexplored markets. While first movers face new and unexpected challenges, competitors that launch later can capitalize on some of the mistakes done by the trailblazer company, or even imitate and improve some of their offerings.