Does the ‘app economy’ still exist?

 

 

 

 

 

 

Something extraordinary happened last week

An app (meerkat) (which was a ‘massive hit’ at SXSW) and which was launched only two months ago – raised $14m in funding.

Three days after that – it’s popularity plunged rapidly after the launch of Twitter’s periscope.

Probably never to return to its height.

A few more days after that Meerkat and Periscope are neck to neck

In two months  an app goes from launch – to funding (14m) – plunge.

Some blame the Tech journalists – and there is some truth in that.

A whole ecosystem has grown up to support the ‘app economy’ – including the VCs, tech journalists, conference creators, hackathons and industry analysts who rank apps.

Sentiment changes rapidly.

Now, some articles call it the Schrödinger’s meerkat(is it dead or is it alive?)

Others have taken to defend the tech journalists themselves ex from the Guardian Tech journalists may have been wrong about Meerkat but they’re right to get excited about new apps

But there is a wider question here ..

Apps uptake metrics(ex downloads) have become a bit like the dot com era obsession ..

There is a lot of activity but it is transient (as we see in the case of Meerkat) because the value no longer lies in the App itself.

For long term success, the value (if it exists) lies beyond the app.

Here are some reasons why the app economy dynamic is changing and value is shifting away from the app:

a)      Even when the app has been poor, the company has done well when the value lay beyond the app. The best example of this is LinkedIn – whose app and website are always frustrating to me. I need to sometimes use wikihow to understand even the basics such as deleting a contact  . The app could be a lot better – but we still use it despite the app

b)      APIs are becoming increasingly important and are managing much of the complexity for example health care APIs. The app then becomes a simple interface – APIs do the work

c)       ‘App only’ brands are hard to sustain and expand: Unlike Linkedin – where the value lies beyond the app – for Rovio(angry birds) the product (and the value) was in the app itself. And 2014 has been a bad year for Rovio. It’s  unclear if the popularity of the brand will ever return.

d)      Content has a fleeting timescale and its getting even smaller: The diminishing popularity timescales apply to all online content. Gangnum style broke the YouTube popularity counter – but look again.. Gangnam style was launched in July 2012. Google trends for Gangnum style shows that it peaked in Dec 2012 – with a precipitous drop soon after. And Gangnum has been dropping in popularity ever since(even when cumulative views increase). Content apps also may have the same problem. Beyond the first year (or two) – they appear to be from an older era especially if the user base is younger. The Draw something app also had the same problem of drop in popularity

e)      Which apps do IoT developers use? Is like focussing on the dashboard and ignoring the engine: Which apps do IoT developers use is the wrong question – because it places too much emphasis on the app than the vertical(IoT). It’s like saying – which web development technique they use for their website? Does it matter? IoT is a hugely complex domain. Same will apply to automotive apps, healthcare apps etc.

f)       Apps are not open: Coming back to Meerkat – we are reminded with Twitter’s move that apps and social media are not open. If Twitter does a deal with Operators for ‘sponsored data’ – that’s even worse for innovation like Meerkat (and I expect that type of deal will be increasingly common – further suppressing  Long Tail innovation)

Analysis:

Apps continue to drive Long tail innovation

But for the reasons mentioned above, there is a fundamental shift in the ecosystem

Value is now closely tied to the vertical

In some ways, it is a natural maturing of the ecosystem

But when tied to a specific vertical – the value apportioned to the app is relatively less

Knowledge and integration about the Vertical now becomes more important than app in this maturing phase(leaving aside the Openness issue).

For example – for IoT – IBM bet $3 billion into IoT – but the focus is on analyzing data coming from many different devices.

The skillsets to do this are not the same as for the app – although there will be undoubtedly an app interface

So, does the app economy still exist?

Increasingly, not in the form we know it (across verticals)

In a more maturing phase, we will see deeper integration with specific verticals.

For other forms of apps – there is no way to predict economic value even over short periods

PS – if you are interested in IoT – have a look at this(  upskill to Big Data, Data Science and IoT )

We will also have an online version. Please contact me at ajit.jaokar at futuretext.com