How do you write a post and make a statement like this without one single example? Seriously, give me a list of mobile app companies that failing in this manner and scale.
I could rattle off plenty of mobile startups that went the raise-money -> no-traction -> acquihire route. But I don't know what he's talking about here and he offered no data to back it up.
Lots of investors made pre-traction mobile-consumer bets in early 2011. Some even built up teams of 5 or 6 people before having launched a product.
In late 2011 and early 2012, savvy investors quickly noticed that many consumer apps started to stagnate around 300-500K total users. Although their total user counts continued to grow, their active user count did not (often only reaching a few tens of thousands monthly active users) – some even had exponential decay.
Good examples would be something like Highlight (Sorry guys) or Mixel (Very well done app, but never grew that big, and got acquihired) or Cinemagram (Fellow Canadians, raised money, but with Vine and Instagram for Video are now getting trounced).
Another poignant statement is his closing statement on the closed garden App Store model, which seems to be having problem creating big hits now, or as Marco put it the other day, "the rich are getting richer." For example, Apple has been promoting video apps like crazy, stuff like Vyclone, or Directr get lots of love from Apple, but you just can't control the masses.
In the early days (2008/2009), a couple people I know got apps featured in the App Store. Basically, they got a call out of the blue from Apple.
Now, it seems that it is back to good old fashioned relationships and community [1] and marketing. Media coverage, for one, being the most important. Media coverage goes a whole long way longer if the editor actually knows who you are (e.g. you met them in person and had a real conversation) and likes what you are doing.
http://realmacsoftware.com/blog/how-to-get-featured-on-the-a...
And they still probably get a call out of the blue from Apple. But not by dumb luck, by doing the work required and getting better and better (at marketing, community building and nurturing, the app, all of the above)
[1] http://www.kk.org/thetechnium/archives/2008/03/1000_true_fan...
Take the Highlight app, for example. It's still in the app store, was updated today, and they have open positions on their jobs page. That makes them a colossal failure that over-hired and burned through cash like a dot-com startup? Please. They probably wont raise another round until they pivot and find a real business model, but it seems they're still in a position to do so.
Edit (please read for amusement value): http://www.sandspring.com/charts/cdj0214ipet.html
When IPOs turn bad, lots of people notice. When a angel or VC firm loses a few million dollars, nobody except a handful of cognoscenti know or care.
https://news.ycombinator.com/item?id=5911728
People don't seem to understand that building a company 99 cents at a time isn't going to work. Real companies have overhead. Sure someone in the Ukraine might be doing great with $1000/month in revenue but that's not going to cut it for most people.
"building a company 99 cents at a time isn't going to work"
Except when it does. You could say the same thing about any price point.
From your earlier thread:
"It doesn't sound like the economics are there to build the next EA, id Software, etc."
Is Rovio not many times bigger than id software?
Of course if the mobile economics are so bad that the big players will invent vacuum cleaners to suck up all those crumbs, I'm toast...
A small business that makes enough for one or two people to survive is a perfectly valid goal, but it's not a "startup" as defined by pg and others.
Games and utilities can be searched, but the Best Buy truth is that only a few actually make some money, and this tends to be the best ones that are featured in the Top 25 rankings (Turboscan, most camera+ or camera add ons, or SuperCell/Minecraft, etc...). Like at Best Buy, where being featured in the shelves triggered more sales (ask Intuit). Some vendors have created niche businesses for themselves, but they tend to be not VC-funded.
Social is a category with a lot of large mobile only players (Instagram, Snapchat, Tango, WhatsApp, Viber, Voxer, Vine, Grindr, Waze, Kik...) and a lot of web players (Facebook, Twitter...). None of the mobile only players monetize their user base right now appart from WhatsApp. What are the odds that another one can emerge from there in a niche? It's tough, and it's not a discovery/search problem, because the day that Facebook launched in 2004, Mark Zuckerberg could not count on search to drive traffic to Facebook as nobody was typing "pictures of my Harvard Econ 102 classmates" on Google.
If you go back to the web, with the exception of a few social products (Linkedin, Facebook, Twitter), which businesses make money online?
ECommerce? They do pretty well on mobile if you look at older models like eBay or new ones like Uber or Instacart.
SaaS? This one is a tricky one, the Apple Store tax of 30% even on SaaS subscriptions discovered on mobile does not help this market to thrive.
Media? Media is already tough to monetize on the web, but on the mobile with lower CPM, it's mission impossible.
Lead Generation? This is a very search oriented field, and the Google search ecosystem will dominate this market until the Google search stronghold disappears.
Overall, I am not saying that mobile app startups are easy - but I think that there is a misconception about what they really are - thus comparing to their web counterpart, when the right analogy might be the software rack at Best Buy.
I do believe there are a lot of apps that do get Apple's approval and get showcased, but never really make it -- which you do address. A great example in the video space is Vyclone which go promoted very much, and still gets front page promotions quite often, but they never really went anywhere.
http://blog.zmitri.com/startups/2013/06/14/you-need-a-millio...
I can give you lots of specific examples if you send me an email, but I feel bad calling them out in public, because it's a grind and I don't think it's my place to do that.
You guys see so many companies that you probably have a fantastic, if not the best, take on this. I scoured around looking for data and statistics to figure out what was going on, but you can just ask your companies I imagine.
We're still going either way.
- To understand what pain you are solving, and have a compelling reason to believe a mobile app is a suitable solution and not a solution in search of a problem.
- What competition there is, and how you will beat them or at least compete on level footing. If there is no competition there is probably no market.
- Understand who your audience is.
- Understand how to message your audience. And understand out to get that message out.
- Have a way to get feedback, and have a conversation with your audience.
- Have a way to leverage your early adopters to drive more usage.
- Have a way to put money and time in one end and get positive App Store reviews out the other. (Pre-requisites: a product people really like.)
- Understand your fixed and variable costs. Understand your margins.
- Have a way to measure success or failure. Have a way to A/B test and iterate. Be able to see what people are doing in your app and where they are falling off.
- Have an plan on how to do all this quickly and objectively.
- Be able to tell the difference between a doomed idea and an app that just needs product refinement.
- Make calculated risks that can be measured. Throwing a giant PR launch over the fence and saying a prayer is not a calculated, measurable risk.
What we need to solve this problem depends exclusively on Apple / Google, since they chose to follow the native / app store path.
- Change App Store discoverability, removing the emphasis on Top ranks - Decrease delay times between approvals - Provide a way to discover from where your users come from
We're also locked to the native approach, which slows down the whole process. This is also a huge drawback for mobile as a whole. For instance, there isn't a easy way to crawl apps like Google crawl's pages.
In mobile, we're basically 'recreating the wheel' in many areas. All this effort could be directed towards supporting web technologies the best way possible, like webOS was doing in a great way.
The stores themselves are really the gate-keepers to installs/sales. Right now it's just about paying to get to the top of the chart (with a product that can stay there I guess).
There has got to be another way other than top ranks, and maybe that lies in a community-driven model of some sorts. Who knows ><
We have iOS and Android apps but our service is 100% web views from launch -> registration -> usage. We did this since we are still in the prototyping process and are not concerned about optimization/conversion rates.
It's been very useful for us. UX has been terrible but we've been able to gather valuable feedback, make a couple of big changes and a lot of small tweaks.
Now, we are on the cusp on rolling out to making everything native and starting heavier marketing.
The start-up scene today is nothing like it was in 1999, trust me I was there and I've got the worthless shares to prove it. That said, a lot of people want there to be a bubble so perhaps they were voting the headline rather than voting the article?
Two points
1. Yes, most startups failed in 1999 and most startups are failing now. This isn't unexpected. Anytime, there is a boom in startups, most of them are going to fail.
If the first 10 startups succeed there will be 100 more. If the first million startups succeed, there will be 10 million more. Ultimately, most of them will fail.
2. imo Andrew is mistaken in assuming that the failures are due to startups having a "super high bar for initial quality in their version 1".
If anything, I'd say that the quality of many apps is too low, Many of the big-name apps are often unstable and crash (not just in the V1 version, but in later versions as well)
It seems like getting a "big" app in to the app store is a huge risk because it requires hiring the type of people that can polish an app to the point that it's app store acceptable, and those are expensive people. Going in to such an expensive process with a murky idea/business plan/value proposition seems suicidal.
BUT this is changing. The number of app customers is growing very quickly. Eventually, perhaps soon-ish, volume will overwhelm the currently crappy economics of selling apps and collecting ad fees.
Ubiquity of smartphones is more than just more customers. Once penetration gets high enough you can actually buy advertising and PR and expect it to work. More users drive a virtuous cycle that cures most of what's wrong with trying to sell mobile apps.
One mistake I see a lot of companies making is treating mobile like a sandbox. And I say this having gone through a 3 month accelerator that was for companies doing mobile apps. The ones that succeed, or even have a chance of succeeding, build a platform, into which mobile is a conduit. Outside of games, there are very few mobile apps I can think of that wouldn't be better built in this way. Call it "the cloud", a platform, or whatever you like. The point is, mobile is hot right now, but a solid business is more than an interface, it's a service.
Saying "it's the web back end" sounds a bit code-centric. Twitter originally had an extremely broken back-end that didn't scale at all, they were down half the day. It still got extremely popular.
It's about the gestalt - the service, novelty, differentiation, virality, targeting, marketing, etc etc.
I don't call back in question it's pertinence and efficiency. I just point out that publishing an app has again become a significant milestone you need to prepare and be ready for.
So it's not a matter of culture or free choice of developpers. It's a consequence of particular constrains.
