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Mobile app startups are failing like it’s 1999 (andrewchen.co)
226 points by dko on Aug 15, 2012 | hide | past | web | favorite | 90 comments



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.


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?


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.


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-...


since you so kindly share with us -- can you please name some of those apps? I would love to download (pay if needed), play with it, see the value with my own eyes. Thanks!


The artist in me finds your shovelware business model sad, although my inner accountant nods approvingly.

It's important to recognise that we're talking about a shovelware market. If people want to pay $2 for a piece of software, most of that software is inevitably going to be least-common-denominator tat aimed at getting noticed and scoring a quick buck from enough people before it gets lost in a sea of other tat.

It doesn't really matter any more whether it started because of the app store model, or the early developers choosing very low prices like many other new businesses even though they could have charged more, or dare I say cynically pitching instant gratification to a market full of young people with shiny new phones and some but not very much money. The culture today says mobile apps are cheap, and the market will get what it pays for.

It's a shame that making any kind of high-end and higher-priced mobile app is probably a non-starter now. Then again, perhaps that is for the best, and software that solves harder problems or provides deeper functionality or offers large volumes of good quality content is better presented via some other medium anyway.


> It's important to recognise that we're talking about a shovelware market

This. Where $3 are considered a high price you realistically can only produce apps that are worth their low price.

If you try anything different - making a great polished product and trying to strike a hit - all power to you. But then you are playing a lottery and not doing business.

> It's a shame that making any kind of high-end and higher-priced mobile app is probably a non-starter now.

This is what drove us (luckily I must say now) away from mobile to web based SaaS. When we build a mobile app now it's only a complement to our SaaS service and usually is given away for free to get users for our service.

Sadly the geek in me hates the web development stack ... but my inner business guy keeps the geek at bay ;)


Curious - why does the geek in you hate the web dev stack?


I think what he meant is that design guidelines, libraries, and UI frameworks provided by OS resonate perfectly well with majority of the userbase. Yet every app that comes out of Valley seems to need to redefine basic navigation patterns and color themes.


Your disapproval of "shovelware" business model and the related shallowness of design does make sense; however, failing fast and often does not imply the malicious intent as you imply. Think of this as a search for an anchor point, a good business, so that the whole enterprise can take a breath. If you hit the spot in the first try, all power to you! Chances are even when you have a good hunch, some unlikely/unforeseen thing will block the way to success. Why feel sorry for having all the eggs in one basket, when there are many things in place that would make it possible for you to do otherwise, e.g. several easy ways to reach customers, in several countries, and relatively untapped markets etc. This may not be valid for big companies with lots of spare money to cover the losses until the app has the power to take off, or developers who are in love with an idea to the point that they will sacrifice themselves until giving it a real push.


what're your thoughts on HTML5 games? Since you're so invested in so many apps across multiple platforms, there has to be some thought on a cross-platform strategy. Any way I can reach you directly?


The reality of HTML5 is that it is extremely processor intensive, radically different from mobile browser to mobile browser, and simply not supported at all on 4 of the 8 platforms I create for.

Building a XML-based object architecture and then interpreting it into ObjC and Java, then standardizing the data structure it accesses ends up being far better than hacking together a series of poorly performing HTML-based apps.

In short -- native is still best, by far. Put of the contents of an app itself in a standard database that all the native apps can access, to minimize your native code dev time.

Or just use Unity.


> Or just use Unity.

I'm curious how you deploy to the non-smartphone devices with Unity, as it only has iOS and Android target support built in.

Do you use the output of some other target's build with your own glue libs for each supported device? Or are there Unity plugins for this kind of thing? Or is it some other kind of wizardry?


Willing to share how big of a team you need to have to turn out 10 apps per month? I'm honestly curious!


Don't want to give away all the secret sauce, but you can do it with about 10 US workers and about triple that in India.


What is IAP?

Thank you for the post btw.


In App Purchases.


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


Agree with you totally, although I'd argue that mobile is most definitely the essence of Uber's business. If it weren't for the app I wouldn't use Uber; being able to see how far away my ride is and where it is right now is the only thing that keeps me from calling a cab.


Mobile is vital to Uber's business to function, but it isn't dependent on organic traffic through the App Store to succeed. They can exist with a relatively low number of installed users because their users have an absurdly high average revenue and retention rate compared to most mobile applications.


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.


App discovery is a problem for consumers as well. My iPad does not show no more than ~40 games. I don't know if I am not looking hard enough or I just can't browse more than that what the app store app shows. I can search for an app, but I have to know the name of the app for that. So for me, if the app does not show in the app store app links, then the app pretty much does not exist.

If I do want a particular application, I search Google first than the app store. Most probably some one has already gone through the pains of finding an app and has talked about it online.

So discovery problem exists for app consumers as well. And there in lies a startup idea in app discovery but I wonder how Apple/Google would allow that.


Some anecdotal evidence: I went searching for an app that would stream the radio stations in iTunes. Several pages in, I ran into a ton of radio station streaming apps - they were the same app, each wrapping a different radio station.

After 10 pages of that, I gave up.

Searching the App Store or the Play is a painful experience whether you're just browsing around to find something interesting or if you're looking for something that does a specific thing. The categorization isn't fine-grained enough and the "curators" will pretty much let anything thru without showing any signs of quality or originality.

The desktop software market still suffers from this a little bit, but enough time has passed that some standards for quality have emerged from the general consciousness. You release a desktop app, there are some gold standards to compare to.

If anything, the app market is going to be incredibly painful for quite some time.


Agree with this. App discovery is rough for devs and users. From a dev perspective, it's hard to stick out. There's some fantastic apps out there that get lost in all the noise.

From a user perspective, the goal of discovery is to find the best apps that match my interests. This goal is hard to reach because of a poor user experience paired with inefficiencies in search and the download process.

It's this culmination of factors that makes app discovery a headache.


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!


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


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.


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...), 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.


The problem is, I believe, TFL won't open up their API without charging for it.


you may want to try http://tripease.info/en/

disclaimer: i know these guys


Currently, the filter options for searching through Apple's App Store are pretty limited, so discovery is a bad experience for consumers as well. At least I get frustrated pretty quickly and often resort to Google.


Wasn't discovery one advantage that app store proponents brought up when touting the closed garden (in comparison to the open web)?


Sure but it didn't scale. As usually happens with the closed web.


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.


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...


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.


Fragmentation is really variable depending on the kind of app being made. In terms of UI design, fragmentation is not much of an issue as there are a lot of techniques and libraries, official and unofficial, to allow UI patterns across 90%+ of devices.

The real issue for fragmentation comes from manufacturers and carriers changing the OS for their purposes in a way that breaks some API functionality in some or all cases. Apps that have to do tricky things with streaming data, multimedia playback, and hardware sensor interaction have this the worst, but just how bad it will be really depends on what you are doing. It should be noted that most devs will never have a major fragmentation problem and that the platform is improving with each major release to make these problems less apparent.


In case anyone is unaware, anything MG Siegler writes about Android should be taken with a grain of salt.

Particularly prescient nearly two years ago: http://news.ycombinator.com/item?id=1675574 (and parent discussion)

  > It's really unfortunate that a writer like him gets a voice in an influential 
  > blog like Techcrunch. I hope he just post things like these on his personal blog.
Edit: Android fragmentation affects different types of apps to different degrees; games have the toughest time from what I understand.


One of the big issues I see is mobile app distribution. In app store, you have this dynamic where the top ~25 are making tons, and then there's everyone else not making so much. I'm assuming it's the same dynamic on Android.

So how do you get your first 1,000? Do you spend money on some mobile incentivized downloads, or ads, or what?


I'd love to hear from someone who has built on both platforms extensively. My concern with this path is that the QA madness of the world of Android would slow you down as much (or more) than the app store madness of Apple?


The app store updates aren't really THAT big of a problem with Apple. I mean it isn't pleasant for sure. But you can use TestFlight or something while still in beta. I'm not sure that will scale to product/market fit but it will scale enough to give you good engagement metrics.


I've found testflight to be an absolute UX disaster for non-geeky users.


We've been using TestFlight to distribute new builds to multiple clients around the world, distributed to their user's iPads with a notification through mail, during their user acceptance testing phase and it just works great! None of our users complained about Test Flight's UI for sure!


We found it ok when a user only had one app they were testing on only one device. Once devices and apps multiply then good luck.


Do you know if compile-to-JVM languages can be used for Android (both technically and realistically)?


Yes, absolutely.

The main drawback is that all of them (at least the main ones - Scala, JRuby, Groovy, Clojure) all have their own runtime libraries, which bloats the size of the app considerably. I believe most people who go down this route use ProGuard to mitigate this problem.


Yes, but with certain downsides. The app is going to be larger than it would otherwise be. The development process is going to be far more difficult that it would otherwise be (configuring things, getting it to work, dealing with new versions of your tools). If you're writing a real-time game, it's probably not going to fly to do this, because in a game you need complete control over all memory allocation to avoid or control garbage collection. Something like Scala spins off a whole bunch of little objects non-stop in ways you can't control, in addition to using far more memory than a normal Java app.


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?


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.


The iOS app review process is insanely long. So long that I started and released my first Android app while waiting for an iOS app to be reviewed.

FWIW there's some ways of mitigating the iOS review times. For example my apps download a small XML config file whenever they start up or come back from the background. So I can turn on/off features in the app remotely. Of course this requires the features to come bundled with the app. IMO it's worth it if you want to iterate.


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.


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.


And here's what really bugs me about Apple. We have had multiple expedite requests approved the last few months, so it's clear there is no hard fast rule. The lack of hard rules is what is so annoying. One (or many) submission pass and suddenly an update will get tripped up by some trivial item that has been there since the beginning.


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


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


I believe you are entitled to one expedited review per app per year. In my experience though, getting your update reviewed faster , buys you precious little (yes, even if you are fixing a bug)


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


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)


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-...

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...

5. Do small businesses have high failure rates? Evidence from Australian retailers. http://www.allbusiness.com/buying-exiting-businesses/exiting...


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


I don't think the point is that they fail, but how easy for them it is to get money (then later valuations) without having users nor revenue. That is what worries people when they draw the similarities with the first bubble.


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.


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.


Apps have ads linking to other apps.


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


I'm too polite for that :)


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


Yeah it would be nice for the article to compare and contrast, say, Instagram and Color. The author could probably cite Color for an example supporting his argument. However Instagram is a notable counter-example that needs to be addressed.


I'm not sure Instagram is a counter-example. They didn't fail, but they never made any revenue either. They just raised a lot of funding and sold the company to Facebook. That's winning the startup lottery, not building a sustainable business.


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...

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

[3] http://www.forbes.com/sites/jonathonkeats/2012/07/20/is-dami...

[4] http://www.villagevoice.com/2012-01-18/art/damien-hirst-died...


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


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

The reason why Hirst is wealthy is because a bunch of rich people with bad taste think his pieces are the bees knees and will pay absurd sums of money at auction for them.


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.


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.


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.


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.


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.


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


+1.


Like the old chestnut about advertising-supported sites: "If you aren't the paying customer, you are the portfolio."


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.


ottaboy! maybe you are right after all.


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.


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.


I think you mean, 1983. http://en.wikipedia.org/wiki/North_American_video_game_crash...

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.


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?


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.


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



Took them long enough!




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