How Cursor Can Win
There have been many new entrants in the AI wave over the last few years, but for me, Cursor takes the pick for the most useful product. I’ve been a daily active user over the last year, and during this period, I’ve used it for a variety of use cases that don’t just involve working on code. I’ve also used it for knowledge management. You see, I primarily store my notes in markdown format, which makes it very easy for tools like Cursor to help me understand trends and connections I wouldn’t have come across myself.
For example, you can add context to the Cursor AI chat by ‘@’ multiple markdown documents (or folders) and ‘talk’ to your own notes. Now, there are alternatives such as NotebookLLM to do the same, but the friction involved in uploading your context is just too high. Cursor is just quick and very responsive. I could talk in a lot of depth about what my workflow looks like, but maybe I’ll reserve that for a future post.
Another major reason I onboarded quickly with Cursor was its pricing structure. Back when I first onboarded, Cursor offered 500 premium fast requests and unlimited slow requests from the top AI models for just $20 a month. To be able to use one subscription for my regular AI questions, knowledge base-specific questions, and coding side projects was peak AI ‘zero percent interest’ days. That pricing structure didn’t last very long. Recently, Cursor announced a new pricing model that would be worth $20 of API usage from the top AI model providers for their $20/month subscription plans. This pricing makes sense for Cursor, but users are not happy. And with how Cursor is currently positioned, user churn could start to be a problem.
To strategically evaluate Cursor’s positioning, I go back to Porter’s Five Forces framework. This framework evaluates an industry from the perspective of its players—the buyers, suppliers, new entrants, rivals, and substitutes. According to Porter, the stronger the force, the lower the profits for the player. Today, Cursor is positioned as a single-player coding AI tool in an industry governed by very strong forces from all of these players. Let’s take a look.
When it comes to buyers (Cursor’s users), they have a strong upper hand. Essentially, what Cursor offers are AI models that users can access from any app. These users have no switching costs should they decide to move to something like Cline or Github CoPilot. There are some advantages for Cursor here: 1) AI is the hype, so Cursor should see a steady influx of users, and 2) While not a strong advantage, Cursor’s tab completion model (which suggests autocomplete for code/text) has been touted as better than its competitors, such as Github Copilot.
Cursor’s suppliers are the AI model companies such as OpenAI, Anthropic, and Google, among others. These suppliers exert a medium force on Cursor. Cursor can swap out any model (as long as it performs for its users) with no switching costs. Moreover, with each of these big AI providers out-competing each other on performance, no particular user needs to be tied to one of these suppliers. However, suppliers gain power in two ways: 1) There are few quality model providers—while many AI model providers are in the game, only a few can truly claim to provide the outstanding results that coders demand (e.g., Opus 4.1, GPT-5 codex). 2) They can vertically integrate—nothing is stopping OpenAI from building an extension in VSCode that replaces Cursor’s functionality (in fact, they just did that by announcing ChatGPT Codex). In summary, supplier power is a medium-strong force in this space.
The threat of new entrants is also strong. Because Cursor is built on VSCode and doesn’t have enough proprietary tech to create a high barrier to entry, new players can enter the market with relative ease.
Similarly, substitutes are easy to come by. Tools like Claude Code, Gemini CLI, and Codex all provide CLI-accessible models that help coders build productively, offering viable alternatives to Cursor’s core function.
Finally, rivalry with established players such as Cline, Github CoPilot, and Windsurf will continue to gnaw at Cursor’s profits, forcing it to compete intensely for market share.
A theme repeated across the analysis is the lack of any switching costs for the user. While this is good for users, it could be a death blow to Cursor in the long run. So how do you make it harder for users to churn? A few areas for Cursor to explore here:
Reducing Friction
Cursor today is mostly used by users who’ve had some experience with coding. But for all the “vibe coders” that are new to the space, a blank project folder and chat may feel too much of a challenge to overcome. Moreover, Cursor relies on the user to leverage some of its most useful features, such as documentation context, MCPs, etc.
Could a starter kit help? What’s the length of time it takes a user who has just onboarded to then launching an app through Cursor? In my personal experience, I onboarded on PHP / Laravel through their resources, but if all of this lived within Cursor, it would’ve just reduced an extra step to get started.
The growth that SAAS starter kits have been seeing is evidence that users are looking to launch their idea without a bunch of friction. Cursor should try to understand its users’ “Jobs to Be Done” (JTBD) so it can serve them effectively. For some coders, starter kits would be absolutely unnecessary, but for others, it could be a feature that makes them come back to Cursor again and again for future ideas.
Moving from Single-Player to a Multi-Player System
Today, Cursor users are mostly using the platform to code their own projects in a non-collaborative environment. At best, they can publish PRs to Github and get a review from a fellow coder. But what makes Cursor interesting is the shared context.
As more and more users take up “vibe coding,” we will see a plethora of users who have no idea of the state of mess their codebase is in. Cursor can be the companion that helps them document their inputs and changes along the way. This way, if they were to share that context with other team members, Cursor could provide the same context to other users. They could collaborate on a shared repo through comments and keep iterating on the project together.
For You, By Cursor
Ultimately, Cursor is very well-placed to understand its users. Cursor knows exactly where users struggle—what kind of areas, bugs, features, programming languages, etc. What if Cursor could guide you to be a better programmer or even a better prompter?
“You’ve been struggling with XYZ implementation. Want to deep dive into the core concepts to understand this better?”
“You’ve had success with this XYZ prompt lately. Want to save it as a workflow?”
The examples above are simple personalization implementations that Cursor could introduce to make users want to continue using the app for all their future projects. The more Cursor knows about me and my coding style, the better its suggestions will be, generating compounding productivity gains.
I’ll be curiously watching how Cursor’s strategy and positioning progress over the next year or so, given how strong the industry forces are. As a fan of their product, I do hope they succeed!