
Mobile app startups are failing like it’s 1999 - dko
http://andrewchen.co/2012/08/15/mobile-app-startups-are-failing-like-its-1999
======
tsunamifury
I'm a product manager that oversees several hundred apps over roughly 25
stores on 8 platforms (Android, iOS, BlackBerry/QNX Windows, Symbian, Bada,
Brew, J2ME).

We are do a steady 2.5 million in sales per year, aiming for 4m next year.

The problem is that startups in the Valley are extremely narrow minded and
aesthetically snobbish in their mobile approach.

1) There are 1 billion feature phone users around the world who have perfectly
usable app stores.

2) You need to launch in more languages than just english, and on more app
stores than just the US market -- Chinese, Hindi, Spanish and Portuguese at a
minimum.

3) Apps that are not SAAS are throw away, impulse buys. They should be
developed with that in mind.

4) Apps have a short lifespan and sell based on timeliness.

5) If you want guaranteed profit in mobile, build mobile extensions for
established brands, don't try to build the next Angry Birds or Apple App
clone.

6) Design matters, but not that much. Touch interface has made UI far more
visceral, but the sale happens long before the user judges the design

7) IAP -- its icky but it works

8) Try lots of stuff rapidly and fail fast. 2-3 month cycles. You can get up
to about 10 apps a month if you have a larger team and a good process.

Finally, this is nothing like 1999. Companies were failing with no product,
spending 1 year + and not even launching. There were late round fundings for
companies that literally had products that were figments of their imagination.

Now two guys in their garage can build a hit app with two macs and no funding
what-so-ever. Don't confuse a highly active, easy to penetrate market with a
bubble.

~~~
frankieim_111
The artist in me finds your shovelware business model sad, although my inner
accountant nods approvingly. I guess profitability trumps a lot of other
concerns, since you can't put out too much software if you're bankrupt.

I don't understand your point (6) - intuition and a small amount of experience
tells me that users judge software overwhelmingly by its design - can you
elaborate on this?

~~~
tsunamifury
My inner artist actually struggles a lot with it as well, however it has
allowed us the runway to invest in larger, higher quality projects.

Regarding (6): Users judge by design, if design is all your app has. If you
are providing an enormous amount of content thats of value to the user, design
becomes secondary.

For example, 2 of our highest performing apps (about 70-100k per year) have
poor interfaces, but killer content that specific users really want access to.

~~~
nreece
Regarding (6): Spot on. "The lower your product is on the Maslow’s hierarchy
of needs, the crappier it can look."
[http://engineering.gomiso.com/2012/02/01/youre-
overthinking-...](http://engineering.gomiso.com/2012/02/01/youre-overthinking-
it/)

------
physcab
This has been brought up before [1].

I believe that currently, the biggest problem in mobile is discovery. I can't
remember what problems were prevalent in 1999 but it could have been discovery
on the web as well. If you're a startup, life is going to suck for you
developing on mobile. You have a name recognition problem on top of developing
on a platform where discovery is inherently broken. It will be tough to get
those organic installs because on Apple, those are driven largely in part to
your placement in the rankings, and there's less to do with SEO on the App
Store as there is on Google. So I think success on mobile can be had in only a
finite number of ways:

1) You buy your way to the top and hope your customer LTV > acquisition costs
(See all mobile games)

2) You spam the hell out of your users on other distribution platforms
(SocialCam)

3) You're lucky and you develop a truly great product that thrives on mobile
(WhatsApp, Camera+)

4) You can succeed with mobile being a utility, but not the essence of your
business (Uber).

[1] <http://news.ycombinator.com/item?id=4172261>

~~~
hkmurakami
I'd contend that discovery is a problem faced only by app creators, not app
consumers. This makes solving the "problem" difficult, since it's hard to
convince the consumer to venture out into non-app store venues to look for
hidden gems.

~~~
ZoFreX
Try finding a good "when's the next bus?" for London on Android, and then tell
me that discovery isn't an app consumer problem!

~~~
prof_hobart
Is your issue that they aren't available or that you can't tell which one is
good?

~~~
ZoFreX
There are far, far too many, and 95% of them are not very good. Even if you
wanted to evaluate them all to try them out, this is actually quite hard - my
searches start returning a mix of completely unrelated apps and relevant apps
after a small number of results.

~~~
prof_hobart
Don't know what your specific needs are, but I did a quick search and came up
with London Transport Live
([http://www.androidzoom.com/android_applications/transportati...](http://www.androidzoom.com/android_applications/transportation/london-
transport-live_bnnzt.html)), which from a quick play seems to do what I'd
expect a transport app to do.

I know that the specific app isn't your point - it's more about the general
question of discoverability, but I rarely find too much difficulty finding at
least one reasonable example of the kind of app I'm searchig for.

------
jiggity
The answer has been simple for me: start on Android. The ability to push new
fixes to live within a few minutes is a godsend. There is still the overhead
of getting people to update the app after the download, but this can be easily
remedied by in-app notification for a one-touch update experience.

I don't think it's too unreasonable to assume that if you hit product/market
fit on Android, you probably hit it for iOS. Launch MVP on Android -> get
first 1k guinea pigs -> pivot, iterate, pivot, iterate -> achieve product /
market fit -> spend 3 months creating a beautiful iOS app.

~~~
kurtvarner
What about the Android fragmentation problem? In the words of MG Siegler
today:

" _The problem is that all of these different devices require testing for each
and every app. They all create a different Android experiences — some in
subtle ways, some in big ways. Some run certain Android apps, others don’t.
Some apps work fine on one device then are buggy as hell on another one.
Sometimes this gets fixed, sometimes it doesn’t. It depends on the popularity
of that device and the resources the development team has._ "

[source] [http://parislemon.com/post/29497373610/im-not-sure-fred-
wils...](http://parislemon.com/post/29497373610/im-not-sure-fred-wilson-truly-
understands-the-android)

~~~
eikaterine
If your whole goal is to use Android as the platform to build your MVP, you
can probably live with limiting your app to, say, only ICS and up to begin
with. This cuts down drastically on the fragmentation issues. Even though
Gingerbread is still dominant, 1K "guinea pigs" is not an unreasonable goal on
ICS.

------
nateberkopec
Isn't it just a little ironic that this is coming from the same guy who said:
"You should aim to hit 100 million active users, and get an off-the-shelf
monetization solution later" Really? "Just get 100 million users and slap ads
on it bro" is good business model advice?

Who's really 'acting like its 1999' in here?

------
dave1619
I think what would really help if Apple had a Fast Track app approval system
where developers could pay $300 to get an update approved within 2 days.
Developers could use it as often as they wanted.

This would allow developers to iterate more quickly. Insanely more quickly.
And would increase the odds of a startup finding product/market fit before
running out of funds.

The current 10 days or so of waiting is really killing the iterative process.

Also, app ratings reset for each new update so developers tend not to want to
update as often as to not upset their ratings... at least some developers.
They need to fix that by not having ratings reset.

~~~
matwood
It's hidden on Apple's site, but a developer can ask for an expedited review.
Bugs, upcoming marketing dates, conferences, etc... all are reasons that can
get an app review expedited.

~~~
dave1619
But Apple makes it clear that it's an exception. Last year we got our first
expedite request approved but our second one denied because we had already
used up our first. Both were for critical bugs.

~~~
coob
Bet it taught you a lesson a bout testing properly though.

~~~
dave1619
No, we tested rigorously. It just makes us really scared to release an update.

------
michaelpinto
I was around during 1999 and the three key differences are:

1\. The audience for the web was very small, in fact most homes were still
using dial up in 1999 since cable modems hadn't even taken off yet

2\. Launching a startup took quite a great deal of money in 1999, today it's a
mere fraction of what it use to cost

3\. The economy in 1999 was pretty damn amazing, but the negative side of this
is that there was a great deal of dumb money floating around

------
credo
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)

~~~
Terretta
Average number of small businesses that fail in first two years is 40%, with
5% from bankruptcy and 20% from failure to return a profit.

References:

1\. Main article by David Maloney [http://ezinearticles.com/?Small-Business-
Failure-Rate—9-Out-...](http://ezinearticles.com/?Small-Business-Failure-
Rate—9-Out-of-10?&id=5089437)

2\. Study 1: Shane, S in the study ‘Startup Failure Rates – The Real Numbers’,
2008 <http://smallbiztrends.com/2008/04/startup-failure-rates.html> 3\. Study
2: Headd, B in the study ‘Redefining Business Success: Distinguishing Between
Closure and Failure’, 2002
<http://www.springerlink.com/content/u5218354gk84k205/>

4\. Study 3: Phillips, B. D., and B. A. Kirchoff (1989). “Formation, Growth
and Survival: Small Firm Dynamics in the U.S. Economy,” Small Business
Economics 1, 65-74. [http://grips-
public.mediactive.fr/knowledge_base/view/483/fo...](http://grips-
public.mediactive.fr/knowledge_base/view/483/formation-growth-and-survival-
small-firm-dynamics-in-the-u-s-economy/)

5\. Do small businesses have high failure rates? Evidence from Australian
retailers. [http://www.allbusiness.com/buying-exiting-
businesses/exiting...](http://www.allbusiness.com/buying-exiting-
businesses/exiting-a-business/587648-1.html)

~~~
credo
These numbers are interesting, but the profile of a tech startup is very
different from that of a typical "small business".

Accountants and manicurists and dentists and consultants run small businesses
they start making money from a very early stage.

Tech startups have a much higher failure rate. The flip side is that these
small businesses (accountants, gardeners etc.) don't have the same shot at
massive scale/success that tech startups have. Andrew isn't talking about
small businesses, his post is about tech startups

------
cjensen
It seems to me that there are two kinds of apps: the "top 100" apps and "the
rest." If you have a killer smashing out-of-the-ballpark idea that will be
"top 100", go ahead and be a startup.

For the rest, it seems to me that App Store economics just don't provide
enough profit for overhead (personnel and investors needing return on
investment) of the traditional startup. One or two-person self-employed shops
survive. Great news if you want to be self-employeed and have a good idea;
Terrible news if you were planning on winning the startup lottery.

EDIT: Need to point out the above is opinion unfettered from the constraints
of fact. I welcome news of facts which refute my guesses.

------
rlalwani
Nice post by Andrew Chen. Unfortunately, apps are more like Windows app that
require installing than web-based apps which can be iterated quickly and
without users taking an action.

The other problem is that mobile apps have no "linking" to benefit from cross-
linking. WWW spread like wildfire for a reason - it made it so easy to
discover new websites and reduced the friction of installation to zero.

~~~
Evbn
Apps have ads linking to other apps.

------
aresant
The article would make a stronger argument with examples of these failures.

~~~
andrew_null
I'm too polite for that :)

~~~
spaghetti
Citing examples isn't necessarily rude. Present it like impartial analysis.
That helps the audience actually learn something from the article.

------
wallflower
Off-topic: Marketing Is Everything (that includes marketing to the right
people who can support your project - investors, advisors, early customers)

When I read the article, I immediately noticed (in the picture) not the
Socks.com puppet but the sculpture behind the puppet. The sculpture was called
"Puppy" I believe. It was brought to you by Damien Hirst, the _brand_ behind
'Beautiful Union Jack Celebratory Patriotic Olympic Explosion in an Electric
Storm Painting’ (2012)'[1][2].

The world's richest artist ($300+M net worth). He is the Madonna, the Material
Girl, of the Modern Art world. The person responsible for those inscrutable
titles for artwork.

Why is he the world's richest artist? His personal brand. A Marketing Genius
(overused, by appropriate here).

He is/was original[3][4].

To be fair, he is using his personal wealth to help create and endow an art
museum.

[1] [http://www.complex.com/art-design/2012/08/damien-hirsts-
flag...](http://www.complex.com/art-design/2012/08/damien-hirsts-flag-for-the-
olympics-closing-ceremony)

[2] <http://www.damienhirst.com/news/august/olympics>

[3] [http://www.forbes.com/sites/jonathonkeats/2012/07/20/is-
dami...](http://www.forbes.com/sites/jonathonkeats/2012/07/20/is-damien-hirst-
the-worlds-most-misunderstood-artist/)

[4] [http://www.villagevoice.com/2012-01-18/art/damien-hirst-
died...](http://www.villagevoice.com/2012-01-18/art/damien-hirst-died-
gagosian-spot-paintings-dots/)

~~~
Prufrock1
That piece is by the artist Jeff Koons, not Damien Hirst.
<http://en.wikipedia.org/wiki/Jeff_Koons#Puppy>

------
salem
For those startups that do iterate and deploy rapidly and often is that they
forget that there is no instant update on mobile devices. You can't do QA by
looking at statistics of your iOS users experiencing bugs.

~~~
imack
You do have some options though. We use <http://www.crittercism.com> for bug
reports in both Beta and live versions. Testflight also has introduced its SDK
for live apps, which also and for our app we user Both do symbolication of
crashes so you can find out what breaks.

~~~
salem
Sure, but the problem is not finding the bug, it's using your users to find
it. You can't rapidly deploy and iterate in minutes on the Apple App Store
like you could with a web app. This is somewhat better on Google Play.

------
technotony
This is why you should build for Android first, like I do. You can make
changes and push the update as often as you want. It doesn't get you the
'cool' crowd (as here in SF nobody installs my app as they all have iPhones)
but it does let you iterate... once the product works, then I'll build for
iPhone.

------
johnrob
Are they really failing? I can agree that many are spending too much time
perfecting apps - but I haven't yet heard many stories of companies going
belly up. Maybe others have?

I'm definitely expecting a pretty big fallout from all the funded startups of
the past 3 years, but haven't yet seen evidence.

~~~
kurtvarner
The media and company never spin it as a failure, but what do you think all
these small acqui-hires are?

~~~
andrew_null
+1.

------
dj2stein9
The answer of course is to start more Facebook-style social network startups,
that leverage the cloud, and mobile connectivity, to enhance advertiser
dollars and deliver maximum value to venture capital investors through
distributed advertising channels.

~~~
solnyshok
ottaboy! maybe you are right after all.

------
jim_kaiser
I'm currently working in a small/mid sized company, on a iOS product for the
iPads as of now, which isn't even submitted to the App Store yet, but already
has its target user base and is developed in close relation with them and
makes a LOT of money.

So, my point is that, its not mobile startups in general that fail, but bad
business models. One thing, you can probably be sure of is that, if a startup
wants to make the next angry birds, either it will immediately succeed in
finding a niche in addictive gameplay or more likely fail a few times before
succeeding.

The world is not binary. The market is just fine. Visibility is the only issue
with the stores. But other means of marketing always exist.

------
jmspring
I've played around with writing a couple of mobile apps (iOS and WP7) in my
spare time. I think of this as a hobby since I have a day job. That said, I
have this mental block -- for me, a mobile app does not make a viable startup.
Sure there are apps that do quite well -- iTeleport comes to mind.

Other apps like Instagram, Groupme, and a few others have more of a platform
feel rather than just a self contained app. Foursquare is another example of
an app that is becoming more -- using the acquired data for recommendations,
etc.

Do others thing similarly?

[edit] - NOTE - I make the above statement in the sense of trying to figure
out how to justify angel/venture backing for what is strictly a mobile app.

------
InclinedPlane
I think you mean, 1983.
[http://en.wikipedia.org/wiki/North_American_video_game_crash...](http://en.wikipedia.org/wiki/North_American_video_game_crash_of_1983)

A lot of people made outsized returns on the first generation of mobile apps
because they were entering a vacuum. And that has encouraged a lot of people
to chase the same "easy money". But the market has evolved and matured and the
easy money has been taken. So a lot of gold rush mobile efforts will fail.
Nobody should be surprised by this.

------
itmag
How about people who are not using the App Store as a monetization vector at
all? Ie I'm talking about people who sell apps to big corporations and the
like. I would imagine that that is a completely different ballgame?

Is anyone here in that situation?

------
anuraj
An app is barely a strategy; having a sustainable and profitable business
model is. App is a vehicle, and in some ways vastly superior to web in
reaching out to people, use of context and focus.

------
SeoxyS
I thought startups did pretty well in '99 and only started crumbling like
dominoes in 2001…?

~~~
biot
It's meant to be ironic. See: [http://allthingsd.com/20120716/marc-andreessen-
says-nows-the...](http://allthingsd.com/20120716/marc-andreessen-says-nows-
the-time-to-build-companies-like-its-1999/)

------
eli_gottlieb
Took them long enough!

