Low Barriers to Entry?

One of the great things about the Web is that it provides the ability to quickly start a business with very little capital.  In a matter of mere days (hours in some cases) you can go all the way from idea to revenue. 

Because of the low barriers to entry, you also see competition in terms both numbers and speed that is unprecedented.  I could identify a company offering a good or service one week and very easily duplicate the business model the next.  (You see this in action on a larger scale between Google, MS, and Yahoo).  How do your protect yourself from competition in situations where there are very low barriers to entry?

1. Build a Brand - This is your company's greatest asset.  This is perhaps the one thing that cannot be duplicated.  Spend the time it takes to identify what your brand is, whether it fits with your target customers, and how you are communicating it to the customer.  If you look at Google's balance sheet, goodwill (i.e. the brand) is valued at $194 million under GAAP, less than 2% of total assets; however, if you asked Google how much the brand is really worth I would guess they would come back with a figure representing a much greater percentage of their total assets.
2. Build a Community - Do not be satisfied with your customers coming to your site merely to buy your goods or use your services, create something more.  Create a place where customers can interact with other customers. Look for example at Amazon .  As a customer I visit Amazon just as much to read customer reviews of book / products as I do to buy goods, (and Amazon isn't paying one cent for this valued service).  They have created a community.
3. Do whatever it takes (i.e. sacrifice revenues) to build a critical mass of users / regular visitors - This is crucial.  In order to succeed you NEED momentum.  You also need visibility on the web.  Both of these things only come once you have a critical mass of users / regular visitors.  Look at Microsoft Live.  As it is new, MS is using Microsoft Live to provide valuable services for small businesses for free.  Many other sites offer their services for free and rely only upon ads for revenues.  Do whatever it is you need to do to get people to your site.  Then, once you have this critical mass you can tweak the business model to increase revenues.