Wow. One well placed post and my readership increases 6x. There has been a lot of interest in my Type I/Type II characterization, and some interesting comments.
Some of the things that I've seen from the discussions I've recently had relate to competition. Type II companies may have a lot more competition than a Type I company would, and this is seen in the case of scripped.com, and various social networking sites. However, the key to making a Type II company work is to find other means, other than technological, to lock in a barrier to entry. Since there is bound to be lots of competition, other means can still establish a single market leader.
For example, there was a time that Hotmail ruled the roost. While there was no barrier to switching, Hotmail's viral marketing established them as the dominant web-based email solution by far. Had Hotmail continued to provide good quality service (rather than getting suffocated by ads and spam, as what happened), they could have held that position for some time. Nevertheless, the position of a Type II company can be precarious. Hotmail lost to Yahoo and GMail, Friendster lost to Facebook, etc. It does appear, though, that a Type II company that has succeeded in being the market leader, only relinquishes the title when they stumble. Otherwise, the market is happy, and actually prefers, to reward a dominant leader. I can't say that eBay has yet to stumble, and barring Craigslist (which, I believe has some relation to eBay anyway), there isn't another trading/auction site that has similar reach.
At any rate, thank you all who contacted me. Interesting discussions.
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