How a rival can make the sale easier
A buyer asked to choose between two products is already halfway to buying. A buyer asked whether to buy something new at all often says no.
Competition validates you. It creates a category. It permits the sale to be this or that, not yes or no.
Godin wrote this in a short post in August 2010 aimed at people who drop an idea the moment they discover someone else is doing something similar. His point is about how buyers decide. Selling something with no competitors means first persuading the buyer that the whole category is worth having. Selling something with competitors means only persuading them that yours is the better one, which is a smaller question.
Street food works this way. A lone food truck on an empty corner has to convince passers-by that eating from a truck is a good idea. A row of trucks outside an office block has already convinced them; each truck only has to win the comparison. The same holds for software. The first companies selling hosted business software spent years explaining why anyone would keep data on someone else’s servers. Once several companies were doing it, buyers stopped asking whether and started asking which.
Competitors also tell a founder something useful: that people are spending money on the problem. A market with no rivals may be an unclaimed opportunity, but more often it is a problem nobody will pay to solve.
The argument weakens in markets where the winner takes most of the prize. Search, social networks and marketplaces become more valuable as they grow, so the leader pulls further ahead and the second product is chosen by few. A crowded field there is a warning. It also weakens when the rival is a large company that can bundle a copy of your product into something customers already buy.
Godin was answering fear, and the post should be read in that spirit. It does not say that a founder should look for crowded markets. It says that finding a competitor is not a reason to quit, which is a smaller and sounder claim.