The Kill Zone
When a platform copies to eliminate a potential threat
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By Massimo Motta and Sandro Shelegia.
The digital economy is increasingly dominated by a handful of powerful platforms. These giants, while delivering significant benefits, have sparked concerns about their overwhelming market power and potential anti-competitive practices. Such practices may give rise to what is known as a "kill zone"—a market segment where competitors are too intimidated to enter. In a recent paper published in the Journal of Economics & Management Strategy, we examine a scenario in which dominant platforms strategically replicate the products or services of smaller, often innovative startups, effectively neutralizing them—and other potential rivals—as threats to their dominance.
At the heart of our paper is the idea that a dominant platform might deliberately copy a startup’s product not merely for direct profit but as a calculated move to prevent the startup from evolving into a fully-fledged competitor. By mimicking the startup’s offering, the established platform erodes the potential rival’s current and future profits, significantly discouraging further investment in a new, competing platform.
Take the case of Facebook and Instagram. As Instagram’s popularity surged, Facebook—recognizing the emerging threat—invested heavily in its own photo-sharing application, code-named "Snap."
This strategy’s implications extend beyond immediate market dynamics. The mere expectation of such aggressive, copycat behavior can deter startups from even attempting to enter the "kill zone." Faced with the threat of imitation, these startups may pivot entirely, opting to develop non-competing products or services that do not directly challenge the dominant platform’s core business. This "ex-ante" effect can profoundly influence the trajectory of innovation in the digital economy.
Real-world examples vividly illustrate this "kill zone" strategy. Take the case of Facebook and Instagram. As Instagram’s popularity surged, Facebook—recognizing the emerging threat—invested heavily in its own photo-sharing application, code-named "Snap." Internal documents suggest this was less about offering a competing product and more about curbing Instagram’s growth to prevent it from maturing into a rival social network. Another striking example involves Twitter and Meerkat. Twitter initially severed Meerkat, a promising video-sharing app, from its social graph. Shortly afterward, Twitter launched Periscope, a similar service, further entrenching its dominance in the video-sharing space.
To rigorously analyze this phenomenon, our paper employs a model featuring two key players: an incumbent platform, representing the dominant entity, and an entrant, symbolizing the innovative startup. Initially, the entrant offers a complementary product, and the two firms share consumer-generated revenue. However, the entrant faces a critical decision: should it pursue a "substitute" trajectory by developing a competing platform, or focus instead on a new, non-competing product? This choice depends heavily on the entrant’s assessment of its current and projected future profits.
The model—robust across various extensions—demonstrates that by imitating the entrant’s complementary product, the incumbent effectively strips the entrant of profits, discouraging the investments needed to complete a competing platform.
The incumbent platform, observing the entrant’s strategic direction, then decides whether to copy the entrant’s product. Copying entails costs (and the model assumes the incumbent would not pursue it without strategic intent), but it enables the incumbent to capture revenue that would otherwise go to the entrant while simultaneously diminishing the entrant’s overall profitability. Finally, the entrant must decide whether to commit additional resources to fully develop and launch its platform. The model—robust across various extensions—demonstrates that by imitating the entrant’s complementary product, the incumbent effectively strips the entrant of profits, discouraging the investments needed to complete a competing platform. More subtly, the mere anticipation of such actions can prompt the entrant to avoid the "kill zone" preemptively, choosing instead to develop a product that sidesteps direct competition with the incumbent.
Notably, while this "copycat" strategy deprives consumers of the long-term benefits of platform competition, it is not always detrimental to welfare. In the short term, consumers may enjoy benefits from competition between complementary products. Additionally, the entrant’s investment in a new platform might be socially wasteful if its primary aim is to capture existing rents rather than generate new value.
Our paper stresses that startups need to be acutely aware of the potential "kill zone" dynamic and will consider alternative innovation strategies that minimize direct competition with dominant platforms.
The policy implications of this behavior are complex. Prohibiting copying outright may not be a feasible option for policymakers, as replicating a rival’s product is generally lawful unless it infringes on Intellectual Property Rights. However, the EU’s Digital Markets Act (Article 6.2) offers a potential countermeasure. It prohibits platforms designated as gatekeepers from using "in competition with business users, any data that is not publicly available" generated or provided by those users—or their customers—through the platform’s core services. A platform could conceivably leverage such data to identify successful complementary products, assess their potential for further development, and copy them more efficiently and cheaply. By banning this practice, the Digital Markets Act effectively raises the cost of copying, reducing the likelihood of incumbent "copycat" strategies. If wasteful innovation by competitors is improbable, this paper provides a rationale for such a prohibition.
Our paper stresses that startups need to be acutely aware of the potential "kill zone" dynamic and will consider alternative innovation strategies that minimize direct competition with dominant platforms. This might involve identifying niche markets, developing truly differentiated products, or focusing on complementary offerings. Incumbents, on the other hand, need to recognize that while copying can be an effective tool for deterring competition, systematically doing so is a costly and ultimately unsustainable strategy in the long run. This might also explain the more strategic approach demonstrated by Facebook's acquisition of Onavo—a company which tracked users’ online activity. According to the US Federal Trade Commission, this allowed Facebook to monitor the growth and popularity of apps active in markets adjacent to the social network market, to detect and evaluate competitive threats early, and neutralize them (through copycat versions, other aggressive strategies including denial of interoperability, or acquisitions such as those of Instagram and WhatsApp) before they had a chance to jeopardize Facebook’s market position.
This blog is based on the authors’ research, which is published in the Journal of Economics & Management Strategy and is included in the Platform Papers references dashboard:
Motta, M., & Shelegia, S. (2024). The “kill zone”: When a platform copies to eliminate a potential threat. Journal of Economics & Management Strategy.
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