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Mobile app startups are failing like it’s 1999

226 points by dko 14y ago

itmag 14y ago
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?
salem 14y ago
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 14y ago
  You do have some options though. We use http://www.crittercism.com 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 14y ago
    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.
rlalwani 14y ago
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 14y ago
  Apps have ads linking to other apps.
aresant 14y ago
The article would make a stronger argument with examples of these failures.
- andrew_null 14y ago
  I'm too polite for that :)
  - spaghetti 14y ago
    Citing examples isn't necessarily rude. Present it like impartial analysis. That helps the audience actually learn something from the article.
- spaghetti 14y ago
  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.
  - TillE 14y ago
    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.
jiggity 14y ago
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.
- jyu 14y ago
  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?
- kurtvarner 14y ago
  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-wilson-truly-understands-the-android http://parislemon.com/post/29497373610/im-not-sure-fred-wils...
  - king_jester 14y ago
    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.
dave1619 14y ago
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 14y ago
  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 14y ago
    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.
    - nanijoe 14y ago
      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)
    - matwood 14y ago
      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.
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johnrob 14y ago
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 14y ago
  The media and company never spin it as a failure, but what do you think all these small acqui-hires are?
  - andrew_null 14y ago
    +1.
  - Evbn 14y ago
    Like the old chestnut about advertising-supported sites: "If you aren't the paying customer, you are the portfolio."
jmspring 14y ago
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.
credo 14y ago
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 14y ago
  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-of-10?&id=5089437 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 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/ 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/formation-growth-and-survival-small-firm-dynamics-in-the-u-s-economy/ 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-a-business/587648-1.html http://www.allbusiness.com/buying-exiting-businesses/exiting...
  - credo 14y ago
    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
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cjensen 14y ago
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.
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anuraj 14y ago
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.
michaelpinto 14y ago
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
physcab 14y ago
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 http://news.ycombinator.com/item?id=4172261
- hkmurakami 14y ago
  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.
  - stephenhuey 14y ago
    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.
  - five18pm 14y ago
    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.
eli_gottlieb 14y ago
Took them long enough!
tsunamifury 14y ago
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.
- anywherenotes 14y ago
  What is IAP? Thank you for the post btw.
  - thegoleffect 14y ago
    In App Purchases.
- frankieim_111 14y ago
  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?
dj2stein9 14y ago
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 14y ago
  ottaboy! maybe you are right after all.
wallflower 14y ago
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-for-the-olympics-closing-ceremony http://www.complex.com/art-design/2012/08/damien-hirsts-flag... [2] http://www.damienhirst.com/news/august/olympics http://www.damienhirst.com/news/august/olympics [3] http://www.forbes.com/sites/jonathonkeats/2012/07/20/is-damien-hirst-the-worlds-most-misunderstood-artist/ http://www.forbes.com/sites/jonathonkeats/2012/07/20/is-dami... [4] http://www.villagevoice.com/2012-01-18/art/damien-hirst-died-gagosian-spot-paintings-dots/ http://www.villagevoice.com/2012-01-18/art/damien-hirst-died...
- king_jester 14y ago
  > 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.
- Prufrock1 14y ago
  That piece is by the artist Jeff Koons, not Damien Hirst. http://en.wikipedia.org/wiki/Jeff_Koons#Puppy http://en.wikipedia.org/wiki/Jeff_Koons#Puppy
nateberkopec 14y ago
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?
jasonhitchcock 14y ago
I would venture that the losses are much less today than in 1999. Losing a few hundred thousand or even a couple million per startup is a drop in the bucket compared to the craziness of the late 90s.
technotony 14y ago
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.
jim_kaiser 14y ago
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.
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SeoxyS 14y ago
I thought startups did pretty well in '99 and only started crumbling like dominoes in 2001…?
- biot 14y ago
  It's meant to be ironic. See: http://allthingsd.com/20120716/marc-andreessen-says-nows-the-time-to-build-companies-like-its-1999/ http://allthingsd.com/20120716/marc-andreessen-says-nows-the...
InclinedPlane 14y ago
I think you mean, 1983. http://en.wikipedia.org/wiki/North_American_video_game_crash_of_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.
stevejabs 14y ago
A lot of these companies would do a lot better if they charged for their apps. It's ridiculous to give something away for free and hope that you can find profit in it later. That usually just means that you go the route of selling your user's info and hoping for the best.

226 points by dko 14y ago

itmag 14y ago

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?

salem 14y ago

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 14y ago
You do have some options though. We use http://www.crittercism.com 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 14y ago
  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.

rlalwani 14y ago

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 14y ago
Apps have ads linking to other apps.

aresant 14y ago

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

andrew_null 14y ago
I'm too polite for that :)
- spaghetti 14y ago
  Citing examples isn't necessarily rude. Present it like impartial analysis. That helps the audience actually learn something from the article.
spaghetti 14y ago
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.
- TillE 14y ago
  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.

jiggity 14y ago

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.

jyu 14y ago
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?
kurtvarner 14y ago
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-wilson-truly-understands-the-android http://parislemon.com/post/29497373610/im-not-sure-fred-wils...
- king_jester 14y ago
  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.

dave1619 14y ago

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 14y ago
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 14y ago
  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.
  - nanijoe 14y ago
    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)
  - matwood 14y ago
    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.
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johnrob 14y ago

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 14y ago
The media and company never spin it as a failure, but what do you think all these small acqui-hires are?
- andrew_null 14y ago
  +1.
- Evbn 14y ago
  Like the old chestnut about advertising-supported sites: "If you aren't the paying customer, you are the portfolio."

jmspring 14y ago

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.

credo 14y ago

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 14y ago
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-of-10?&id=5089437 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 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/ 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/formation-growth-and-survival-small-firm-dynamics-in-the-u-s-economy/ 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-a-business/587648-1.html http://www.allbusiness.com/buying-exiting-businesses/exiting...
- credo 14y ago
  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

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cjensen 14y ago

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.

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anuraj 14y ago

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.

michaelpinto 14y ago

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

physcab 14y ago

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 http://news.ycombinator.com/item?id=4172261

hkmurakami 14y ago
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.
- stephenhuey 14y ago
  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.
- five18pm 14y ago
  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.

eli_gottlieb 14y ago

Took them long enough!

tsunamifury 14y ago

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.

anywherenotes 14y ago
What is IAP? Thank you for the post btw.
- thegoleffect 14y ago
  In App Purchases.
frankieim_111 14y ago
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?

dj2stein9 14y ago

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 14y ago
ottaboy! maybe you are right after all.

wallflower 14y ago

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-for-the-olympics-closing-ceremony http://www.complex.com/art-design/2012/08/damien-hirsts-flag... [2] http://www.damienhirst.com/news/august/olympics http://www.damienhirst.com/news/august/olympics [3] http://www.forbes.com/sites/jonathonkeats/2012/07/20/is-damien-hirst-the-worlds-most-misunderstood-artist/ http://www.forbes.com/sites/jonathonkeats/2012/07/20/is-dami... [4] http://www.villagevoice.com/2012-01-18/art/damien-hirst-died-gagosian-spot-paintings-dots/ http://www.villagevoice.com/2012-01-18/art/damien-hirst-died...

king_jester 14y ago
> 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.
Prufrock1 14y ago
That piece is by the artist Jeff Koons, not Damien Hirst. http://en.wikipedia.org/wiki/Jeff_Koons#Puppy http://en.wikipedia.org/wiki/Jeff_Koons#Puppy

nateberkopec 14y ago

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?

jasonhitchcock 14y ago

I would venture that the losses are much less today than in 1999. Losing a few hundred thousand or even a couple million per startup is a drop in the bucket compared to the craziness of the late 90s.

technotony 14y ago

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.

jim_kaiser 14y ago

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.

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SeoxyS 14y ago

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

biot 14y ago
It's meant to be ironic. See: http://allthingsd.com/20120716/marc-andreessen-says-nows-the-time-to-build-companies-like-its-1999/ http://allthingsd.com/20120716/marc-andreessen-says-nows-the...

InclinedPlane 14y ago

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

stevejabs 14y ago

A lot of these companies would do a lot better if they charged for their apps. It's ridiculous to give something away for free and hope that you can find profit in it later. That usually just means that you go the route of selling your user's info and hoping for the best.