BusinessPundit: I think one of the most difficult challenges in a startup is resource allocation tradeoff between working on your product and working on your distribution channels. Regardless of what we like to believe, it's rare for a product to be plucked from obscurity and amplified all over the blogosphere. Most "viral" success comes as a result of lots of hard PR work. If you are well funded, you can work on both. But if you are resource constrained like most startups, is it a better use of your time to build a better product or to focus on your distribution channels?

For most startups, you can use existing distribution channels once you have a good enough product. It takes some work to build those relationships depending on what kind of product you offer and what type of distribution you need, but in most cases, time is better spent on product development first and distribution second. But what if what you want to build is your own distribution channel?

Owning a distribution channel is a very powerful position. Particularly on the web, which is so search driven, it's very powerful if you can become a destination. But how do you do that? I think you use a "trojan horse" business model. It works like this:

1) Start with a quality product.

2) Leverage your distribution relationships to serve others

3) Leverage your increasing role in the distribution process to gain a larger share of the profits.

Startup Tradeoffs - Building Product vs. Building Distribution [BusinessPundit]

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