Mobile app startups are failing like it’s 1999

Stop the madness
The long cycle times for developing mobile apps have led to startup failures that look more like 1999 – it’s like we’ve forgotten all the agile and rapid iteration stuff that we learned over the last 10 years. Stop the madness!

Today, seed stage startups can now get funded, release 1 or 2 versions of their app spread over 9 months, and then fail without making a peep. We learned the benefits of how to iterate fast on the web, and we can do better on mobile too.

How things worked in 1999
How’d we get here? Back in 1999, we did a similar thing:

Raise millions in funding with an idea and impressive founders
Spend 9 months building up a product
Launch with much PR fanfare
Fail to hit product/market fit
Relaunch with version 2.0, 6 months later
Repeat until you run out of money

This was Pets.com, Kozmo, and so on. Maybe you’d fire your VP Marketing in the process too, out of frustration.

Between 2002-2009, we learned a lot of great ways to work quickly, deploy code a few times a week, and get very iterative about proving out your product.

How things work today
Then, with the arrival of the big smartphone platforms, we’ve reverted. It looks like 1999 but instead of launching, we submit into the iOS App Store.

It looks like this instead:

Raise funding with an idea and impressive founders
Spend 6 months building up a product
Submit to the app store and launch with much PR fanfare
Fail to hit product/market fit
Relaunch with version 2.0, 6 months later
Add Facebook Open Graph
Try buying installs with Tapjoy, FreeAppADay, etc.
Repeat until you run out of money

Not much different, unfortunately.

The platform reflects its master
We’ve gotten here because the App Store reflects Apple’s DNA of great products plus big launches. They are a 1980s hardware company that’s mastered that strategy, and when developers build on their platform, they have no choice but to emulate the approach as well.

Worse yet, it lets people indulge in a little fantasy that they too are Steve Jobs, and once they launch a polished product after months of work, they’ll be a huge success too. The emphasis on highly polished design for mobile products reverts us back to a waterfall development mentality.

Don’t burn 1/2 of your funding to get to a v1
Startups today have a super high bar for initial quality in their version 1. They also want to make a big press release about it, to drive traffic, since there’s really no other approach to succeed in mobile. And so we see startups burn 1/3 to 1/2 of their seed round before they release anything, it becomes really dangerous when the initial launch inevitably fails to catch fire. Then the rest of the funding isn’t enough to do a substantive update.

What can we do?
How can we stop the madness? What can do we do to combine the agility we learned in the past decade with the requirements of the App Store?

If we can answer this question, we’ll be much better off as an industry.

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http://www.oxygencloud.com Julia Mak

Nice post. The industry as a whole has to come together to stop the madness – which means:
- VCs: invest wisely, understand the technologies and the market. Is there really a product market fit and a real opportunity?
- Media: Stop covering all the “me too” apps. When one certain app/feature hits some sort of milestone, a bunch of clones pop up and media (sometimes) follows blindly creating the unnecessary hype.
- Entrepreneurs/startups: Be ambitious, think outside and box and do your homework. Don’t just do what someone else is already trying to do, don’t waste all your money on marketing/PR campaigns because everyone has a billboard on the 101 these days. Think big, be creative. Focus on the product, focus on your customers/users so you can actually develop the right product that people need and want.
http://www.rescuetime.com webwright

This is an awesome post. I used to believe that you need a big launch to succeed in the app store. I thought there was so much gravity in the app store that you needed a PR bomb to get you into the top apps– and that organic downloads from Apple’s “Most Popular” lists would keep you above the crowds. But I’ve seen too many big boom apps fall to the basement once their PR wore off.

I think the solution on our side is to launch earlier and re-embrace the MVP. Don’t gun for PR. Find a beta audience and serve them, even if you (and they) have to wade through the awfulness of TestFlight (“easy over the air betas– HA!”). Focus on scalable/repeatable customer acquisition and don’t Launch (with a capital “L”) until you’ve solved many/most of your product/distribution challenges. That way, you’re launch is throwing gasoline on a fire and not a wet pile o’ wood.

But Apple needs to solve some stuff too. They need to make easy over-the-air beta testing for a broader population of users. They need to allow for smaller/rapid iterations. And they need to make app store search better.
http://www.facebook.com/brezina Matt Brezina

This is a great observation Andrew. One thing we did was launch 2-3 versions of our product under a different apple account, without our personal names on the app, before we launched Postagram. When we did a PR launch the product was basically just a branded version of our work from the past 4 months; we knew it would function well and we knew users would love it. Since then we’ve never spent more than 4 weeks developing a release. And we particularly use Android for quick experiments – the apple 1 week app approval delay can really slow down the iteration cycles – that, and the difficulty in doing a/b tests are my least favorite things about the current mobile development environment.
Adam MacBeth

I’ve recently heard an argument from some prominent investors and entrepreneurs that “minimum viable product” doesn’t work in mobile – due to slow iteration times (App Store approval) and the fear of bad App Store ratings. Of course, it’s their companies that are flaming out.

I think this type of thinking is just wrong on its face, and unfortunately, only exacerbates the problem. If you think you need to perfect your app before launching it, you’re going to spend that much more time without real feedback, so when you do launch, you have even less time to correct course.

First off, the MVP approach is not dependent on a fast cycle time. Sure, the more iterations you go through, the better, but it’s still applicable to hardware and other slow-cycle time industries. Better to do fewer iterations than none at all.

With regard to ratings, I think MVP may actually be the solution and not the problem. If you start off with a minimal product (and no, minimal doesn’t mean poorly designed or buggy, because that WILL get you shit ratings), you’re that much more likely to be able to iterate from there. If your initial product gets ZERO traction, maybe you have to re-do under a different name, but then IT’S A DIFFERENT PRODUCT. If the MVP gets some traction, you can add or improve from a simple base – which is much easier than evolving a complex app.
http://twitter.com/robin_ahn Robin Ahn

This, “We’ve gotten here because the App Store reflects Apple’s DNA of great products plus big launches” sums it up nicely.

Further to Matt’s point below, is there a space in the market for a better over-the-air testing platform? Testflight works…but with too much friction for users and is horrible at scale. Does the lack of notable alternatives to Testlight say pretty much what you’re trying to say: people aren’t testing enough?
http://twitter.com/AcorgInc Acorg Inc

Iteration is not the biggest problem here IMO.

Stats from Backbonemag.com June/July 2012 issue suggest that mobile apps just aren’t making money, definitely not enough for followup rounds.

12% of apps earn $50,000 or more in revenue, 59% don’t generate enough to break even on development costs. 60% earn less than $5,000 with their most successful app.

It’s not a surprise to me that app companies are failing when 88% don’t make enough to pay a single founder, let alone a team.

What is the same about now compared to 1999 is the sheer number of ideas getting funded that have no possible way of succeeding. And as Julia (in the comments) points out there are many me-too ideas which further dilute market share.

Working quickly is great if the market is supporting the ideas.
dylanized

The flip side is that lots of 1 and 2-man/woman app shops _are_ making a living off their own, less famous apps. It’s hard to have a startup-sized hit in the app store, but tons of individual developers have created successful lifestyle businesses…
http://twitter.com/manasgarg Manas Garg

Great post for sure. I have been an advocate of HTML5 based apps because that gives you some control to update, iterate on the fly without going through an app store update cycle.

I don’t expect Apple to change anytime soon. But I do feel that developers will lean more and more on the HTML5 than native purely because it’s faster to iterate that.
JohnDoey

You can push a new version of your iOS app every day if you want. The fact that yor users are 3 days behind is made up for by how willing they are to install an audited app versus unaudited.

The failures you are seeing are failures. It is not endemic to iOS.

Xcode has Storyboard and Scene Kit now to further speed complicated app development. Xcode is adapting to its new mobile role.

Users also like stability. They like the way they can have an iPhone for 5 years. They are looking now to invest in apps that will help them over the next 5 years, not fly-by-night startup chum.
http://alexlod.com Alex Loddengaard

Hey Andrew, can you name mobile companies that are failing? Although my instinct is you’re right that many are failing — and I’ve even tried to make the same claim in my writing — but I haven’t been able to find a good list of recently failed consumer companies.
http://www.facebook.com/eric.carlstrom Eric Carlstrom

Apps fail, sure… but apps are not companies. Can we really say with confidence that more mobile companies are failing than non-mobile companies right now? And if it were true, couldn’t it just the trend of what’s hot in the marketplace, and everyone is trying to take their shot? I think it’s true, the iteration cycle is affected, but a one-week app store delay doesn’t equate a 6-month hail mary.
zato

“We’ve gotten here because the App Store reflects Apple’s DNA of great products plus big launches.”
BS. Once again, Microsoft CNet has found a way to make Apple “wrong” in its success. Out of 600,000 apps on the App Store, how many had “big Launches”? Very Few.
http://www.tapity.com Jeremy Olson

There are three primary ways to make money on the App Store.

1. Build a hit app that soars through the top-charts. This requires the kind of huge marketing blast and probably an Apple feature to make significant money. This approach requires a huge launch because of the way the App Store rankings work. Still, we’re talking hundreds of thousands, not tens of millions of dollars, a year (generally weighted heavily towards the launch). Indie devs can do this on a budget and do really well but it’s nowhere near the revenue needed for a funded company (see Sparrow).

2. Build a niche app and sell it for $5-$1000 a pop. This allows us to follow your approach. A big launch isn’t needed since the people finding your app do their research and are willing to pay big bucks. Again, a tiny team can make a very good living this way but nowhere near profits needed for a funded company.

3. Build a hit app that makes tons of money per user. GPS apps combine popularity with a premium price. Some games make over $5 per user on average through addicting in-app-purchases (and have millions of users). These are the apps that you see in the top-grossing charts. These apps can support a funded company. These apps are ridiculously hard to pull off.

Funded startups need to get creative with #3, finding ways to maximize revenue-per-user and get a ton of users.

The users part is why the big, polished launch is so important. Without a huge launches it’s hard to pull off the volume you need to make money… Without a big launch, the app get’s lost amidst the hundreds of thousands of other apps and it’s hard to recover because of the way the ranking algorithms work. And often times the polished design of the app is part of the minimum viable product – it can be a big part of the differentiator. Apple features polished apps.

A few ideas:

* Use the beta testing period for rapid user feedback loops and iteration.
* Instead of cutting polish, try cutting features. A mobile app needs to be extremely focused any way. If you cut to the core of the idea, you should have plenty of time to polish it.
* As Matt mentioned, startups might experiment with releasing a very early version of app under a different name… the problem is that I think in a lot of cases, without any kind of substantial marketing, very, very little may come of it unless it’s a super contagious idea.
* Bootstrap! Take your time to build out the idea with a design/programming partner in your spare time. Test the polished essence out in the marketplace and see if you need funding to take it to the next level. This is what I do. It is remarkably freeing.

My 2 cents.
http://twitter.com/edwk Edwin Khodabakchian

Looking forward to your follow up post.
http://twitter.com/Ryanb58 Taylor Brazelton

I’m going to have to bring up the fact that not every start-up should think in the lines of becomming a company. I personally have launched a Windows Phone application just for more personal use in the fact that it tracks my money. It’s simple and a solution I needed. I only released it to the marketplace under a student account so my relatives can enjoy the use of it too. I am perfectly content with the version I have it at right now. 1.1.0.0 which is my first update for the application. If it where to take off big though I’d hope the ads did well from the free version and I’d probably hire a 2nd hand guy to help out with the coding to extend the features I already have set. But untill then I just update it with the features I need, when I need them. I’m not depending on it for income or anything, however I do try to make it look good and work well so it presences me well in the marketplace of today.
http://tech-fyi.net
http://www.facebook.com/tanteckseng Tan Teck Seng

If success is so easy, it won’t be a success.
The brick walls are there to stop the people who don’t want it badly enough.
thinktanktheory

would be interested to know how you reached this conclusion.
maybe a good follow up would be a side by side comparison of those that made it, vs those that flopped.
http://obscurelyfamous.com Daniel Ha

Wow, didn’t know that @facebook-5723398:disqus. That’s an awesome approach.
http://andrewchenblog.com Andrew Chen

Genius.
squashpete

There are three aspects to this problem.
1. Mobile is 10 years behind web. It took the traditional Internet apps something between 7 to 10 years to get to a point where developing apps became really cheap. Tools, frameworks, languages have emerged that accelerate development and bring down costs. The mobile world today somewhat feels more like the browser wars in the 90s with the developers trying to make the decision who to support and which one to ditch. If you look into where the great and famous cross platform development tools are (Appcelerator, Codename1, Phonegap), you will see that it will probably take a couple of years to break down these walls and open up the ecosystems to more people (not just the ones who have a Mac and understand the syntax of Objective-C).

2. The AppStores are geared towards homeruns. There is a huge fall-off of revenue and distribution after the top 5, top 10, top 20 and top 50 apps. Due to that it appears impossible to create lifestyle businesses purely on mobile apps. So, the only way to succeed seems to be shooting for the number one spot. But as long as this is the case, games will dominate this industry. Simply because games have always been (and probably will always be) used to unsustainable attention of their users (WoW was the first example where people were playing longer but it took the industry decades to get there). The algorithms for ranking, finding and promoting apps on the AppStore will get better over time, opening up the ecosystems to a wider array of sustainable businesses–but maybe at lower individual revenues.

3. Funding is all about risk and reward and will gradually scale back as both get smaller. The metrics of mobile seemed to intimidating for many investors to ignore: there will be more mobile devices than laptops–even more than people on this planet! As valuations are tied to market potential (or better said: growth therein), the numbers looked ok. Only after a while will people realize what true potentials are and where reasonable valuations are. In the mean time many feel like being in the third gold rush and make the same mistakes as their peers a decade ago.
http://ouriel.typepad.com OurielOhayon

Andrew the problem is actually very simple, a huge number of developers coming to mobile have a light knowledge of the mobile ecosystem: they don t consider enough creating a mobile app as a business and rather focus on creating a product. They don t consider the difficulties of standing out and creating a unique product that will capture attention in no time. They do not consider, soon enough, the necessity to market an app (which is insanely complex and difficult)

Most apps are created with the hope they will succeed and therefore generate a high failure rate. But it does not really matter because most apps cost much less than a website 10 years ago. An iteration cycle is more 2 months and not 1 year. And a fund raise, if any at all (the very large majority of mobile Apps are not VC or angel backed at all) are at usually a low level

Bottom line: consider creating mobile apps a business and not a coding excercize
http://500startups.com/ Dave McClure

yep.
http://yakshaving.net/ ash bhoopathy

Yeah, on the surface, what you’re saying sounds pretty intuitive, but I am curious to see what the actual data is behind consumer failures for mobile app companies.
http://twitter.com/renegdn René Galindo

Great comment.
http://www.randfishkin.com/blog Rand Fishkin

Well said, Tony. I’m not sure why classic web marketing tactics around SEO, social media, content marketing, email, etc aren’t applied more in the mobile field. Just because there’s a switch from web to app store context doesn’t mean a mobile product can’t succeed through web marketing.
http://twitter.com/renegdn René Galindo

Oink, PicPlz, Gowalla, Photovine (Google) come to mind.
http://www.facebook.com/andre.peschong Andre Peschong

The app model is backwards. So many talented developers that are good at creating engaging apps, visually appealing apps and apps that have the bells and whistles built in. BUT, the fundamental strategy of this approach is backwards which is why there are so many zombie apps. The right way is to have a built in “fanbase” and market to people that you already know something about. A rather simple and elegant solution and it brings your user acquisition costs way down because fans have a higher conversion rate and they tend to be social butterflys…
http://yakshaving.net/ ash bhoopathy

This makes it all the more important to find the actual market that you’re aiming for, and “point” your app as a tracking missile to that market. Right now, I don’t really think there’s a good way to connect that. The app categories just aren’t enough. And app discovery tools are hardly discoverable for the average person.

Here’s a bold statement, but I’m wiling to take a bet on it. The current era of “apps” is temporary. It’s going away, just like boxed software at Compusa went away.

But you knew I’d say that, Tony :)
http://www.facebook.com/Bryanzuniga Bryan Zuniga

Well said Tony and apple definitely needs to make easy over-the-air beta testing for a broader population of users, matter of fact that was one of my first challenges a couple of years ago…
http://www.facebook.com/Bryanzuniga Bryan Zuniga

Haha! Nice!
http://twitter.com/shekharyadav shekharyadav

The problem is that most apps that are throwing money into PR or launch, are only fooling themselves into thinking that if they can get above X users, it will either be automatically viral or somehow ranked higher on appstore. It is a vicious cycle, the more you fail the more you want to solve it by throwing more money at it. The primary thing that need to be addressed is make a good product, and iterate fast on it.
kamalravikant

Smart, dude.
http://twitter.com/matthausk Matthäus Krzykowski

@webwright:disqus The point made by many others before me, for example Adam Nash, is that there aren’t many scalable/repeatable customer acquisition tactics in the mobile apps scenario. Sure, historically the App Store is still much a better deal for us than the old carrier or the 2007/2008 iPhone mobile web scenario. Nevertheless at this moment by my count only 40-50 new apps manage to get into the top 100 free apps within a month and gain some customer awareness. In contrast there’s a multiple – possibly hundreds – of good product startups out there, many of them funded & failing as Andrew says. @randfish:disqus ‘s advice to think about a “normal” web presence and web-based growth tactics is very good advice. I see many more experienced mobile growth folks go down this way lately.
ruchitgarg

Start thinking like a shopkeeper,
http://twitter.com/libovness Jonathan Libov

To flesh out your last point (“they need to make app store search better”), since search is the second most popular discovery mechanism within the App Store (second to the even more flawed Top Apps rankings), it would be an immense help to developers/publishers to get information on which search terms drive the most users to their page in the App Store, which ones convert the best, etc. Ideally, you can then extract which ones generate the greatest ARPU and/or stick around the longest. Otherwise your customer acquisition strategy is just (gasp!) pre-internet-like market research and guesswork.
http://learntoduck.com/ micah

Brilliant. Just brilliant. And now, going to be copied a billion times. :)
http://twitter.com/MorningDew777 Jag

Every decade you will get newbies from stanford, mit etc thinking they are creating the World without knowing the history. The oldbies (read VC’s, Angels) using these newbies to make lot of money. A few of these newbies will succeed with something new which people want. All the latecomers will Die slowly with lot of debt and frustration.
http://www.philippmoehring.de P. Moehring

I know some startups that move some of the features into an HTML wrapper, so they can iterate faster around them. Makes some part of the experience slower, but allows at least for ad hoc changes and some a/b testing.
http://widefide.com Anil

that’s so sad. The developers who work so hard on the app end up like this :(
http://twitter.com/lucasrenzi lucasrenzi

the cydia app store releases all new updates AND new releases on (at least) a daily basis. apple takes so much from the jailbreak community, it’d be nice if their search feature at least allowed this kind of filtered search results too
http://twitter.com/pdh3 phi

I think Andrew is talking about big launches like the iPhone, iPad, each subsequent laptop, etc, not the apps. And in that case, he’s right on.
http://blog.8thcolor.com/ Martin Van Aken

Smart if somewhat depressing thoughts (do we ever learn ?). I think we should not need funding to be able to launch a v1 nowadays, and this means we probably does not need (much) funding to be able to evaluate if we have a market.

Bonus : With an answer on this last one, you’ll be in a much better shape to discuss with investors.
Just my two cents.
Martin
http://twitter.com/tonymillion Tony Million

I think if it costs you more than $50k and 3 months to get to a good prototype before you’ve even raised money then you’re doing it all wrong.
http://www.facebook.com/alisa.smirnova.54 Alisa Smirnova

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The main goal of Peter Thiel’s class was to share with young some of his secrets about the beginning of business running.Here are essay version of Blake Masters, graduate of Stanford University, whose work was highly appreciated by Forbes and people all over the world.We prepared Epub version to share this knowledges with our friends! – free dowload here http://stanfy.com/blog/2012/07/09/epub-peter-thiel/
http://www.facebook.com/sebastian.andreatta Sebastian Andreatta

Maybe it’s because people don’t write business plans that stand scrutiny – or any plans at all (no – a slide with market growth, a slide with your team credentials, and a slide with your product roadmap do not a plan make). On the investor side – the VCs are at much at fault for not giving and insisting on guidance on this front. YC is great for what it is but three months to get a product plan and a vetted roadmap? No way. They’re just a developer mill – churning out tons of developers with ideas and little investment on their part – then again they only need to hit one in a hundred to make their money back. Other “accelerators ” and “incubators” are far worse. If you can’t write a biz plan then find a seasoned guy (yes, grey hair) to help you.
AWSOMEDEVSIGNER

Don’t agree – where is the evidence?
http://twitter.com/troypayne Troy Payne

Simple solution… prototype.
http://twitter.com/swagner2 swagner2

Amen!
Beta testing is painful. And the enterprise Dev accounts do not enable this either. It compromises MVP when you’re using App Store to distribute your product.
http://twitter.com/MikaelCho Mikael Cho

Nice idea Matt. We’re working on iterations in the Canadian App Store to get it right for our US launch but I like the thought to do 2-3 versions of an app under a different US Apple account before launching.

As for iteration cycles, we went for the most basic feature set for V1 to see if Apple would accept us before adding anything that may be wasteful.

Leading up to any submission to Apple, we iterate using TestFlight. However, because TestFlight can sometimes be a bit messy, we use invisionapp for a clickable web-based prototype.

Here’s what our dev cycles typically look like:
- We create a clickable prototype with invisionapp
- Get feedback
- Revise clickable prototype (if necessary)
- Build a TestFlight version
- Get feedback
- Revise TestFlight version (if necessary)
- Submit to Apple
- Repeat.
http://alexlod.com Alex Loddengaard

Thanks, Rene. I’m still not convinced, though — four failed companies is hardly comparable to the failure rates of the dot.com bust.

@andrewchen