Actually, in your case you still have competition - You're competing against the desktop-based tool. People coming to your service will be choosing between your tool, and the desktop-based variant.
In regards to the original statement -- if there's no competition there's a possible risk that there's no market. It's not always the case (once in a while you really did create something that nobody knew they needed until you give it to them), but it can be dangerous to delude yourself into thinking you came up with that one product.
More often, no competition means no market and no market means it doesn't matter how good your product is -- nobody wants it.
Also beware of situations where there are a number of small competitors but none of them are making money.
A number of my startup ideas when I was younger surrounded areas that were technologically very cool and got a bunch of hype around smart young technologists, but weren't really something the mainstream needs (yet, I thought). I applied to YC in 2005 with an idea that was basically Google Wave, and I applied again in 07-08 for a game creation site. Both of these had a number of competitors at the time which I took to be market validation. In both cases, there was no market, and all of the competitors failed too.
Ideally you want to be in a situation where there is a big, dumb, rich company making a lot of money solving a problem that you solve better. The big company is your prey; you can then focus on how to win their market bit by bit without worrying about the much larger (and usually intractable) problem of how to create a market.
It could be that there is no market per se, but it can be more subtle than that.
There could be an easily identifiable market that is big enough to provide you with acceptable revenues... But it could be that this market is too difficult to satisfy! There could be any number problems:
- The solution they need is terribly complicated but their budget is pathetic and will never allow you to recoup your development costs.
- Or the problem they have is very convoluted but they expect your solution to be incredibly easy to use. Some markets are full of people who say things "this is too complicated/unfamiliar, I'll just do it on paper/FAX it to them/put it in Excel" or any other shockingly antiquated thinking.
- Or maybe the market looks to be uniform from the outside but once you dive in you realize that each customer in the market requires your solution to work in a different way, making it very hard to please even a subset of the market.
- It could be that the entire market needs your solution to interface with product-X, but that vendor won't even talk to you for any number of reasons (exclusive with someone else, they think you're a joke, or whatever).
I'd make a distinction between no market and no existing market. Generally creating markets is much harder and riskier but often more profitable if you succeed.
Example: BuddyMedia created the social media management tools market; hundreds of startups are now in that market.
You're right. After I posted my response I was thinking of making that distinction and actually talk about the idea of first mover disadvantage (HBR covers it well : http://hbr.org/2001/10/first-mover-disadvantage/ar/1)
IMHO, every dollar that a customer gives you could have gone somewhere else. If you can't figure out where the consumer would spend that money if you weren't around, you probably don't understand your customer very well.
If you think there are no competitors, you are probably missing something.
2) You could just think you have no competition but just be uninformed
3) You could think you have no competition but have tons of non-obvious competition.
Either way if the need exists people are solving it somehow currently even if it's a kludge. That kludge is your competition.
If there is no kludge exists and no real competition exists, then does the need even exist? (Probably not)
FWIW most of these lessons I learned the hard way so try not to take them as saintly advice delivered from on high. I just screwed up and wrote down how I screwed up and then later read the notes.
> If there is no kludge exists and no real competition exists, then does the need even exist? (Probably not)
And even if the need exists, people probably don't think of it as the kind of problem that has a solution ... the hardest part may be getting them to realize that a solution could exist.
(I recently started a website that nobody else seems to have done before -- web version of a desktop based tool)