Mobile app startups are failing like it’s 1999 (2012) | Hacker News Reader

Mobile app startups are failing like it’s 1999 (2012)

andrewchen.co

90 pointslordgeek50 comments

How on earth is this post getting voted so high right now?

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.

Detailed examples of the model of failure described in the post are bound to be few and far between because of the massive selection problem. People who fail are way less likely than people who succeed to to tell the Internet about their experiences.

As someone who builds an app, he was essentially noting that:

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.

Your comment has more information than the entire OP, but things still don't add up.

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.

The reality is, people are taking millions of dollars to build an app, and it takes them many months to push it out. With only one dev, me, my cofounder and I lived off of < 25K for a year, and built up an app with +70K users. That's a lot of wasted time and money on the people who took millions in funding and haven't hit millions of users. I don't know what 1999 was like, but it's true that tons of startups raised money, were slow to validate, and are now are dying.

With regards to Highlight I imagine they will likely die before doing that or give up on the original hypothesis. Statistically speaking that is most likely. I was trying to be helpful, and as you mentioned you can just as well list off a list of startups so I'm not sure focusing in on one example is that useful as I can just as easily name more.

> example, Apple has been promoting video apps like crazy

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...

I feel like what you are saying here agrees with the article.

I've had a banner feature on the photo and video section of the app store. It only drives a couple hundred downloads a day. The reality is, the front page in the US is the only section that drives substantial downloads ~50K in a week is possible with 1st or 2nd position. Neither of those things drive great users which is again what Andrew mentioned as building PR hype.

Also believe it or not, our banner feature was more or less dumb luck. I mean, we make a great product, but getting their attention was a lot of luck.

Anyone who reads this and thinks this is what 1999 is like didn't live through it. In 1999 all these apps went IPO and the founders and VCs made a ton of money. Many wish it was like 1999.

Edit (please read for amusement value): http://www.sandspring.com/charts/cdj0214ipet.html

Don't forget this bastion of the dot com crash ... f##ked company's hall of fame - http://web.archive.org/web/20011217223423/http://fuckedcompa...

I have a pet theory that a key reason this bubble is lasting so long is because it's not happening to retail investors.

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.

Yes. As someone who was a (young) VC back then, I can tell you the dot-com euphoria continued during 1999. It peaked in March 2000, when the Nasdaq hit its all-time high. Shortly thereafter, the public consumer-oriented companies started dying off. The bust accelerated in 2001 when the storage and networking companies went under, along with the startup carriers who were buying all of the equipment.

I was trying to have the conversation about "real mobile companies" today in this HN thread.

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.

I don't think moving the goalposts from $30k/month to $1k/month out of thin air makes your argument more convincing.

"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?

How much of their revenue comes from the initial purchase, versus in-app purchases? 0.99 is great if you can do it over and over again, and get the customer LTV much higher.

I'm not sure if that is good or bad for people like me who just want to be a one man "company", build stuff on their own without all the overhead and friction. If I can pick up a few $1000/months long tail crumbs that are being ignored by the big players, I'll be happy.

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...

Large companies will never ever manage to fill all niches. It's just not in their nature.

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.

Depends what you mean by real. It's very real for a two man team to build something into an app that brings in a few hundred thousand a year (and there are examples of those for sure), but building a huge company is an entirely different discussion.

The problem described here is partially inaccurate. The problem of the app store market is that it is largely misunderstood by investors, as it is way closer to the CD-Rom market of the 1990s than it is close to the web of the post Google web. Most apps in the app store are games/utilities/social products...and this is what consumers go out and look for.

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.

Pretty impressive answer, and I agree for the most part.

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.

Sure. Your app can be featured by Apple like Intuit got displayed prominently in Walmart in the 1980s. But on the web, Vyclone would be available on download.com, not get accessed through millions of search terms on google (like Yelp, eBay, Airbnb, Craigslist, Amazon, Trulia, Linkedin, even Facebook ...all consumer web public/quasi public Companies ...)

Do you think that exposure makes the marketplace more attractive or actually has a role in helping make hits?

Even though app search services do exist -- like Quixey https://www.quixey.com I'm not sure if they make sense for most consumers. How do you currently search for apps? Is it by functionality or because you hear about it from a friend?

Exposure helps make hits for sure... AppGratis was the best proof of that.

The problem of App Search is that app search is a small fragment of the overall search market, and that most searches on the web are for one data point (e.g. search for Chez Panisse restaurant in berkeley or weather in Cupertino). If you have a frequent use case (Yelp, Uber) or an infrequent but very important one (Opentable, Trulia), you are going to download the app. But otherwise? You are going to keep searching on Google, not on the AppStore or on Quixey.

The only way around that would be to index the content of the web content of the app themselves. It would be great, but only Apple can really do that right now... and they are not even trying to. That would be in my mind the only way to make app discovery a reality.

Now for productivity apps/games, they correspond to highly used or niche applications...but are people really looking for them? In the early days of PC games, people were reading review magazines and going to their local Best Buy to discover the best games, and the app store is no exception. I don't see how Quixey would help me there since most of the best games I have played on the iPhone are impossible to describe and you would never have searched for them if Apple had not showed them in front of you...

This article would be more convincing with examples.

Here's my take on the situation as someone who bootstrapped a mobile app, got some traction, and did not end up raising a seed round (We even had a YC interview). I tried to use some real numbers/examples:

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.

Startup or not, you need a plan and a real value proposition. Most people building apps don't have much of either. You need:

- 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.

I got brick walled by a request to sign-up to get posts emailed. That's a terrible way to welcome new readers.

Since comments on the blog post are closed:

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.

I agree 999999999999% with the discoverability problem. Seems like if you were first on the app-stores you just made money because there wasn't much around you... but these days they are incredibly saturated (with good stuff and with crap), so we definitely need a new way to discover stuff.

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 ><

I agree it's difficult on mobile having to support two platforms with many resolutions.

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.

Like this approach

Its a link baity headline and a content free blog post posted by an account that is one day old.

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?

This was previously discussed at https://news.ycombinator.com/item?id=4389061. My comment

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'd be true what's he saying only if you asked one question; what's the point of agile development? Is it to just release a better product faster? Don't startups need to do something that others aren't doing? Imagine a world where somehow, everyone is doing agile development on mobile; so we'd just get better quality apps faster but how would a startup become successful in a sea of otherwise also high quality and rapidly iterative apps? The very vicious cycle that he's warning us against, in another form, is exactly what he's advocating.

Is this not a symptom of the app standard set by the app store? It seems like your app store submission is going to be judged largely in light of the the other apps in the app store, and the design/interface standard there is already so high...

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.

I write about Android app development and consult to developers of mobile apps. It is still a tough business to make money selling mobile apps at app store retail prices. All of my clients have some other business model.

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.

I don't know if this is true. But.

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.

The author of this article is obviously someone who doesn't see the bigger picture of mobile apps. The problem is inexperienced developers who drop out (programmers) think they can 1. Write an Instagram clone or some one hit wonder app and expect it to help them build a business without any science behind what they do, obviously those will tank, its a not an app that supports a company, its shown time and time again that it is the web back end that supports a company and all those services. btw I am not a web developer, I am an native developer.

> its shown time and time again that it is the web back end that supports a company and all those services

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.

Yeah I was being to specific but having a service is and a scalable back end is core if anything to get to marketing etc..

One thing that I think might be an interesting gamechanger is Mozilla's HTML5 approach to apps. It would be stupendous if FFxOS enabled a much better mobile app world.

What do people really expect though.. I don't understand how all of these people can just say i'm building an iPhone app! then try and start a company based around this basis. Come up with an original business model and maybe you can get somewhere. Instagram was an app, but the app was just the medium for the service. Think of an app as your store front, what really counts is the products you sell on a daily basis.

I'm building a calculator app! We're going to be the next Microsoft!

best of luck! :D

My feeling is that this return to waterfall development model is induced by the app validation process imposed by Apple.

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.

Thanks for the practical feedback on managing workflow. It's useful to me as a person who's just getting into developing mobile apps.

One mobile app seldom makes a business (unless it is instagram, whatsapp etc.). Sound business model or massive user acquisition will be key.

It's a false premise that App Store approval = 6 month deployment cycle. Sure you can move faster on the web, but not that much faster.

Considering you have to go through the app store approval process every time you push an update out (so sitting in queue for a week even for bug fixes), building for web or android first gives you much more agility.

This blog post is 10 months old, if it matters.

single app != startup in most cases

Reply on news.ycombinator.com