Brij Singh's Blog

November 26, 2012

Unbearable Lightness of Mobile-Native Business Models

Filed under: Entrepreneurship — Brij @ 3:02 am

Everything in mobile computing is fast. New trends, new segments, new apps and marketshare movements – every possible indicator is moving fast. Crazy things happen in fast moving market. Where to shoot and where to hide – not so easy anymore!

Probably everyone who cares about technology trends has read thought provoking post by Fred Wilson. Things have changed, yet again. It’s a great post and you must read it. Thought of adding my 2 cents on this particular point –

the consumer is moving from desktop/web to mobile/app. we’ve talked about this transition ad naseum on this blog. it is the single biggest megatrend in the consumer internet space right now. most new consumer internet startups need to build for iOS, Android, and web at the same time. it is making the startup more expensive and time consuming. distribution is much harder on mobile than web and we see a lot of mobile first startups getting stuck in the transition from successful product to large user base. strong product market fit is no longer enough to get to a large user base. you need to master the “download app, use app, keep using app, put it on your home screen” flow and that is a hard one to master

It is by far the biggest megatrend of our time and we are in very early stages of it. How early? Lets look at these numbers –

We have close to 550 million websites, 1.2 billion smart phone users and roughly 1 million iOS apps in app store (maybe close to 2 million apps once we include all available app stores). Massive action and opportunity between these two numbers – 2 million apps and 550 million websites.

So if we go back to ‘download app, use app, keep using app, put it on your home screen’ cycle, Download (discovery), use and keep (retention) are definitely problems to be addressed but they don’t matter that much for app entrepreneurs. Discovering the right business model for mobile apps is a bigger problem. Finding the right business model is going to help majority of startups to sustain and comfortably pay their bills.

It is not about consumer sector versus enterprise market. Both are easy to manage or can be pain in the ass, it always comes down to your leverage and runway. Keep it simple. Follow where users are going and follow efficient(read cheap) distribution channels, app stores are clearly proving to be a destination where future trends are converging. App stores are only going to get better. Soon it will be very hard to differentiate between Google Search and Google Play. For all the praise Dropbox, type of services are getting, I can bet most of their new enterprise customers come via app stores. Workday and Yammers of tomorrow will start from app store and that’s how they will keep sales cost dramatically low, compared to conventional 6 odd months long sales cycle in the enterprise market.

Bigger pain point lies in the long wait time every app publisher has to go before they find their own business model. Most of the business models we discovered during web era are not that effective on mobile. Fred also wrote a very useful post about business models and linked to Hackpad resource, glance through it here – all the business models applicable to tech startups. Very few of them have come after the app store revolution. In-app purchase is probably the only one which qualifies as a first class business model citizen of app world. We need to get more such mobile native business models. Business model discovery on mobile front is in early stage. Give it some time.

If you are a startup (here I am talking to myself!), it’s important that you are buying time to figure this out. Staying small is a virtue in this case. Market is still growing. For majority of users, smart phone is going to be their first access device. I can’t even imagine what will be the new definition of enterprise market when that large section (mostly non-US) of new knowledge workers start doing business with their smart phones. We are yet to get into that cycle.

Pace yourself. Business fundamentals haven’t changed. Where to shoot and where to hide has definitely changed.

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