Apps: The End of Browsing Freedom

Have no fear, apps are here!

Searching for an obscure website on Google will soon be part of the past. Studies show we are moving towards a world of mobile Internet. Mobile data—going through smartphones and tablets—is shifting from browsers to apps. Soon, apps will dominate Internet traffic…but don’t take my word for it. Let’s look at the data.

Internet Traffic is Going Mobile

According to Cisco’s Virtual Networking Index Study:

“Last year’s mobile data traffic was nearly 30 times the size of the entire global Internet in 2000.”

 In 2014, the number of mobile devices and connections reached 7.4 billion. Today, there are more mobile connected devices than people on Earth.

Global Mobile Devices and Connections Growth

Source: Cisco VNI Mobile, 2015

 

Apps are Dominating Mobile Internet

 In the figure above, we see that laptops are on the decline, while smartphone growth is exploding. Now that we know mobile devices appear to be the dominant form of accessing the Internet in the foreseeable future, let’s take a look at mobile Internet traffic trends.

Data from Nielsen shows that apps account for 89% of media consumption on smartphones, while only 11% goes through mobile browsers.

Source: Smart Insights, 2012

Implications of an App-Centered World

We’ve seen the exponential growth of mobile devices compared to traditional laptops and how Internet traffic on these mobile devices is primarily via apps. With these trends pointing to a future dominated by mobile applications, it’s hard not to ponder how that will impact larger technological trends.

The following are my 3 predictions for the future of an app-dominated Internet:

  1. Smart watches, phones, cars, TVs, and houses will tip the scale towards an app-only experience. With all computing devices running apps, operating systems will focus on integrated applications that don’t require a browser. Microsoft and Apple will push hard to cut Google’s search out of the user experience by redirecting traffic through apps with functions such as voice control/Siri. Eventually, developers will focus on apps rather than standalone websites.
  2. Governments will push to end “free browsing” in order to stop illegal activity, copyright infringement, and child pornography. With all traffic moving through apps, content can be more easily monitored and blocked.
  3. With all Internet activity directed through apps, the stage will be set for world domination by artificial intelligence robots. All hail Siri.

By: George Gonzalez


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LINE may not be well-known in the US, but it has been exploding in Asia, Middle East and Europe since its launch in 2011. LINE is a messenger app with 300 million users worldwide and its growth is accelerating. The last 100 million users were added in mere 4 months. Some argue that LINE may replace Facebook or Twitter as the most popular social platform. LINE is expected to go public next year with an estimated valuation of over $10bn.

What is LINE?

LINE is somewhat similar to other messaging applications, including WhatsApp, KakaoTalk, or Facebook messenger. LINE allows users to send text, share photos/videos, and make phone calls/video calls to another LINE account(s) for absolutely free.

What’s different is that LINE also has a huge library of “stamps” – a small picture of a character that describes emotion, thoughts, actions, and objects. Stamps act as a way to mimic real human interaction by communicating very subtle points. Some of these stamps are sold for a price (usually $1 for a set of 30 stamps) and LINE shares revenue with its media partners. This has been the major source of revenue ($132M for 2013 Q2) since its launch.

Another difference is that LINE is quickly moving towards platform strategy. The initial version of LINE was only able to handle messaging, but now that LINE is installed in virtually everybody’s smartphone, LINE started to expand its offerings. LINE Mall offers online shopping, LINE Game is consistently topping ITunes rankings, LINE Camera competes against Instagram, and LINE Card is a dominant e-card service in Japan. All these services that be accessed thru LINE application and more and more people are using them.

Birth of LINE and its mobilization strategy

The birth of LINE is somewhat interesting. NAVER Japan, a subsidiary of Korean internet company, was in the midst of developing a photo sharing application when a big earthquake hit Japan in March 11th, 2011. As mobile network was disrupted, people formed lines in front of public phone booth (public phone act as emergency line in Japan and never gets interrupted).  Realizing there is a strong need for efficient and easy communication; the development team switched their focus and started developing messaging application. LINE was launched 3 months after the earthquake.

LINE faced a classic chicken-and-egg problem and tackled to solve the problem in two ways; technical and marketing. LINE has an auto-sync function that allows user’s existing phone book to automatically sync to LINE contact list. Even if I was the only one using LINE, I could still text my friends using LINE (my text would appear as a regular text on their screen). As I don’t have to bother importing phone book to my LINE account, once I started using LINE I had no reason to switch back. Because LINE texting was absolutely free, people quickly switched.

On the marketing front, LINE initially focused on high school girls because they are the ones who often start new trends in Japan. LINE created cute “stamps” that high school girls would love and solicit user feedback very frequently. Once high school girls adopted LINE, it spread to college girls, junior high school girls, boys, 20s, and the rest of the population.  LINE dominated Japanese market in less than a year.

 LINE’s future and competition

 LINE deliberately focused on expansion of its user base and not on monetization strategy. LINE is believed to be already making profit with its stamp and game sales, but the real monetization is expected to come after its IPO. LINE may start selling advertising space like Facebook or open its platform and charge a fee to whoever wants to access its user base.

LINE’s biggest competitors are WeChat (over 1 billion users, mostly in China) and WhatsApp (mostly in the US and Europe). As there is a strong network effect, messaging app is likely to follow the same path of SNS and one or two players will take the dominant positions. Demographic and social trends are in favor of LINE because LINE has a dominant share in Asian markets, where smartphone penetration is expected to skyrocket in the next few years. Whoever comes out as winner will enjoy the similar power as Facebook today.

References:

http://linecorp.com/en/

http://thenextweb.com/apps/2013/08/08/line-corp-brings-in-132m-of-revenue-in-q2-2013-as-its-messaging-app-contributes-76/

http://www.digitaltrends.com/mobile/messaging-appline-and-its-us-efforts/

http://www.cubrid.org/blog/dev-platform/the-story-behind-line-app-development/


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The Anti-Social Networks

Text and photo messaging apps such as WhatsApp, WeChat and Snapchat have seen explosive growth. WhatsApp and WeChat have 300 and 400 million users, respectively, and Snapchat sees 350 million photos per day on its app [1]. But not everyone has been a winner as more players have entered the space. For instance, GroupMe, which acquired millions of users and was sold to Microsoft for a reported $40-$80M, has stalled [2]. As the messaging app space becomes crowded, how will the market evolve?

In the shadow of the giant(s)

The success of messaging apps begs the question – could Facebook or Google simply take advantage of their massive existing user bases to crush the competition? In fact, Facebook already has its own separate mobile messenger application, which had 56 million users as of last November (more recent stats are not available) [3].

While a massive user base like Facebook’s 1 billion+ active users is usually a trump card in most instances, I believe it is actually a disadvantage in the messaging space. Users have gravitated towards direct messaging apps not just to avoid SMS charges, but also to have a more immediate and intimate mode of communication. While large social networks such as Facebook may connect users with the world, messaging apps connect users with the much smaller subset of people they actually want/need to communicate regularly with. Messaging apps allow users to create smaller groups (“anti-social” networks, if you will) that do not include that Facebook “friend” we met once years ago or that acquaintance who over shares. Facebook’s messenger app attempts to address this by allowing users to create groups, but it is unclear whether this is helping adoption. A recent article by venture capitalist Josh Elman supports this view, attributing the popularity of messaging apps in part due to the fact that Millennials are looking for a way to engage in real conversations against “a noisy world of social sharing” and hyper-connectedness [4]. If this is true, then Facebook’s legions of users may be more of a liability than an asset when it comes to messaging apps.

Winner takes all?

That said, even if we believe large incumbents are not an unconquerable threat, one still wonders how the market will evolve given the many competitors already in the space. Is this a winner-takes-all (WTA) market or is there room for multiple players to succeed?

As I recently learned in class, WTA markets typically exhibit 1) high multi-homing costs, 2) limited demand for differentiated product and 3) strong positive network effects. I believe that although the messaging app market satisfies the first two criteria, the network effects may not be strong enough to tip the market towards a single player. Let’s consider each predictor in turn:

  1. Multi-homing costs: Having to manage conversations and contacts across different apps is inconvenient. Users are likely to prefer a single service, making a WTA market more likely.
  2. Demand for differentiated product: The current product landscape has some differentiation, largely based on whether the app focuses on photo or text. However, I think we are already seeing and will continue to see product convergence. Many apps are moving towards offering both photo and text, as well as video and even voice messaging capabilities [5]. I believe users ultimately want a single app to allow multiple forms of communication. This limited demand for a truly differentiated product makes a WTA market more likely.
  3. Network effects: Here’s where the answer becomes less clear. Although users derive more value from a messaging app when more people from his/her network join, there is a limit to this. Given the private & immediate nature of direct messaging discussed in the prior section, users tend to interact with small groups in predictable manners, similar to how they use Skype. This actually leads to weaker network effects, making a WTA less likely.

This last characteristic is important because it implies that messaging apps are not unequivocally winner takes all. Since each user has a small number of interaction partners, it is not difficult to move as a group from one service to another for messaging apps. As we’ve seen in the case of GroupMe, even messaging apps with seemingly large user bases can stagnate when new services come along.

Show me the money

While the messaging app space may not be WTA in theory, whether or not multiple competitors will actually succeed also depends on how many players can build a sustainable business. We have seen a few different early approaches to monetization. WhatsApp charged users 99 cents per download (before moving to a free model), GroupMe tried unsuccessfully to sell offers in-app, international players are selling stickers (e.g. large-scale emoticons) and others are considering freemium models that charge for additional functionality [6]. While the path to monetization is unclear for many apps, it seems particularly challenging in this market. Most messaging apps are positioned as a free alternative to traditional services such as SMS, thereby priming consumers to expect the services at no charge.

Ironically, if there is not a straightforward way to monetize quickly as a standalone business, I think we may start to see more messaging apps consider exit strategies like GroupMe’s: sell to a larger player who wants a foothold in the market and has the cash to support the business while it figures out monetization. In other words, this means the giants may still be in the game after all, and I for one am excited to see how the messaging app wars will play out…

[1] Erin Griffith, “Can GroupMe Still Compete in the Messaging Wars?,” Pandodaily.com, October 8, 2013, http://pandodaily.com/2013/10/08/can-groupme-still-compete-in-the-messaging-wars/, accessed October 2013

Billy Gallagher, “Snapchat Now Sees 350M Photos Shared Daily, Up From 200M in June,” TechCrunch.com, September 9, 2013, http://techcrunch.com/2013/09/09/snapchat-now-sees-350m-photos-shared-daily-up-from-200m-in-june/, accessed October 2013

[2] Griffith, “Can GroupMe Still Compete in the Messaging Wars?”

[3] Josh Constine, “Facebook Mobile User Counts Revealed,” TechCrunch.com, January 4 2013, http://techcrunch.com/2013/01/04/how-many-mobile-users-does-facebook-have/, accessed October 2013

[4] Josh Elman, “Generation Touch Will Redraw Consumer Tech,” TechCrunch.com, September 29, 2013, http://techcrunch.com/2013/09/29/generation-touch-will-redraw-consumer-tech/, accessed October 2013

[5] Liz Gannes, “The Quite Mobile Giant: With 300M Active Users, WhatsApp Adds Voice Messaging,” AllThingsD.com, August 6, 2013, http://allthingsd.com/20130806/the-quiet-mobile-giant-with-300m-active-users-whatsapp-adds-voice/, accessed October 2013

[6] Griffith, “Can GroupMe Still Compete in the Messaging Wars?”


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Fresh out of the Thanksgiving holiday shopping spree, a few interesting reports came out digging into the Black Friday-Cyber Monday ecommerce shopping performance. cialis sale

rts/black-friday-2012.html” target=”_blank”>According to IBM, mobile engagement continued to soar, making up 24% of the traffic and 16% of the sales. Fab.com, a design-focused ecommerce startup, has been seeing very interesting mobile stats on sales and the dominance of the iOS platform – revenue from its mobile apps reached 25% of total sales just 30 weeks post-app launch (95% of which came from iPhone & iPad), and mobile apps generated over 1/3 of its Black Friday-Cyber Monday sales. This phenomena is not hard to undersand – people are simply spending more time with their phones than with their computers.

The continued rise of smartphone led to an appreciation for a “mobile first web second” strategy – in order to deliver the “right” mobile experience, you have to start building your product with the mobile UX/UI in mind (vs. building a website and then repurpose the web experience to mobile). As a result, countless startups focused all their resources and energy to build a killer iOS app (why iOS first? because it continues to dominate Android on engagement and monetization) only to realize there are some serious flaws in this approach.

Some of the issues around building a “mobile first/mobile only” product can be attributed to the unique properties of a mobile device (e.g. smaller screen translates into a constant battle between usability and monetization, small/ineffective ad units, etc.), but a few of the key problems can be traced back to how Apple runs its App Store.

Problems:

  • Discovery/Distribution – One of the key differences between the web and mobile is that there is no SEO/SEM in the App Store, a key tool for organic traffic and paid marketing for driving visitors to your websites. Yes, you can “kind of” buy pay-per-installs through ad networks such asTapjoy and Flurry, but Apple continues to crack down the whole pay-per-install model with its latest App Store rule change. The sheer volume of apps in App Store plus its notoriously random “Featured Apps” system makes it extremely hard for an app to gain any organic visibility. In short, no one has cracked the app distribution nut and Apple is not helping.
  • App Approval Process & Cumulative Reviews – In a web environment you can iterate much more cheaply and faster than you can do so on mobile. For one, it costs much less to build a “minimum viable website” to test key hypotheses than to develop a fully-functional native app. Apple’s app approval process has improved over the years in terms of speed and transparency, but it is still a barrier for fast iteration and testing (wait time running up to to three weeks). Furthermore, the fact that all Ratings & Reviews of an app is carried over across versions means that the first version “can’t suck.” The only way to avoid “getting on the app store stage before you’re ready” (to avoid bad reviews) nd test your app with users is through Apple’s Ad Hoc distribution (but you’re limited to 100 beta testers) or third-party hacks such as TestFlight.
  • Apple’s 30% Cut – Apple charges 30% revenue share on gross revenue generated through apps (in-app purchase AND ad revenue). 30% off the top is great profit for Apple in the short-term, but if no one can build a real mobile business in the iOS ecosystem given the high customer acquisition costs (see “Discovery/Distribution” above) and the hefty 30% payment to Apple (and we haven’t taken into account credit card payment processing, taxes, etc.), Apple might have a problem in the long run.

So what can you (and Apple do) beyond reconsidering the above policies?

  • (You) Build Web Presence to Drive Mobile Download – Instead of “mobile first web second,” maybe the alternative strategy is “mobile product web marketing” – leveraging traditional SEO/SEM and the web’s larger screen to do more effective, targeted marketing and a simpler on-boarding process. You do the “selling/convincing” on your homepage, walk the user through a sign-up process to create an account, then bring the user to the App Store to download the app. An example: I found out about Lift through an article and arrived at its homepage, which did exactly the above. I would’ve never thought of looking for the Lift app in the App Store otherwise. Instagram also leveraged its web presence (via shared Instagram photo landing pages) to drive awareness and downloads.
  • (Apple) Native “Share An App” Function and Referral API – The major benefit of Apple’s “closed” App Store ecosystem is that the user experience is much more unified across all apps. Contrary to the web environment, there’s no easy way to create a mobile viral loop among iOS devices to facilitate sharing an app with friends. One thing Apple should consider is to build in a native “Share An App” function that sits within each iOS app, so a user can easily spread the word with contacts who have iOS devices. To push this thought further, Apple could develop a referral credit API (e.g. invite a friend and get $10 credit when the friend installs/purchases) to further help facilitate native viral loops within the iOS environment.

Apple’s iOS ecosystem is currently enjoying the mindshare of developers, and developers need a thriving ecosystem that can help them build a business. It’s a fine balance to strike between maintaining the integrity of the user experience and optimizing on monetization, but Apple should start spending more time to help developers make a plausible business case by investing in “mobile first on iOS.”


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While the digitalization of music has been underway for well over a decade, there continues to be a steady flow of new services emerging to satisfy all forms of digital music distribution.  Platforms such as Pandora and Spotify are well known across even the least tech savvy of circles, though these services are just the tip of a rapidly growing streaming music revolution.  Actually owning music is already becoming a thing of the past – with increased wifi and wireless coverage rendering any smart mobile device into an on demand personal jukebox.  This comes without the need to ever download and, in most cases – purchase, any music.  Leading the next wave of on-demand music delivery are three innovative startups – each approaching the landscape from very different angles – and in so doing, providing consumers with a variety of novel ways to experience new music.

SoundCloud

Founded in 2008, SoundCloud is the leading social sound platform with over 20 million registered users1. Referred to early on as the “YouTube of audio”2, SoundCloud enables users to record any sound – whether that be a music record, full album, demo instrumentals, or even a live set.  The audio file is then uploaded onto SoundCloud’s servers and then available for streaming across any computer or mobile device.  SoundCloud is a way for new artists to get their music out to a wider array of fans (think the next gen distribution platform previously provided by MySpace) and for established artists to consolidate some of their non-core activities such as podcasts, remixed tracks, and live concert recordings.   Whether you’re looking for Swedish House Mafia’s set from Coachella, a teaser from Usher’s soon to be released single, or Kaskade’s weekly mix, SoundCloud has it all – and does so with fervent artist support – often a rarity in the world of “free music.”   In addition, Soundcloud’s API enables virtually any website to embed a SoundCloud player on their page – greatly broadening the platform’s reach around the web without login requirements.

Like virtually all social networks, SoundCloud allows users to follow one another – providing a live update feed of all the latest tracks and sets from their favorite artists.  Also, fans can insert text comments directly into the audio feed – providing means to actually communicate with musicians through the music and enabling a real-time conversation that can act as beta test for new songs.  Comments like “love the beat drop here”, “this guitar riff works well”, and “speed up the tempo” are common and represent the ability to crowd source feedback – which can be very helpful for up and coming artists.  The band R.E.M. even launched a crowd sourced contest to remix tracks from their recent album2.

Perhaps most important to fueling user growth among the masses is continuing to ensure that top artists remain engaged on the site.  To that end, SoundCloud offers an array of data analytics tools for premium members to get detailed dashboards such as who is listening to their music, what demographics they are popular with, and where their music is being shared.  This is also SoundCloud’s primary monetization form at the moment – charging for premium monthly subscriptions to the small % of users who want access to this toolkit and ability to upload more content on the servers.  Some speculate that with their latest partnership with payments company Adyen2, the company may pivot into a platform for selling individual tracks a la iTunes and Amazon, but the company remains mum on their strategic direction.  Regardless, SoundCloud still represents a great means to connect with your favorite artists and opens up an entirely new channel of music that you’ll never be able to find in stores.

Check it out at: www.soundcloud.com.

 

Turntable.fm

Turntable came virtually out of nowhere when it launched to rave reviews in the summer of 2011.  Drawing huge word of mouth interest among the tech set in Silicon Valley, the site experienced incredibly fast growth and within just 3 months was streaming over 1 million songs per day3.  Much of this was due to the fact that turntable had ushered in a new form of digital music: synchronous listening.

The site is based around the concept of a DJ chat room.  When a user logs into the site, they create a profile and select an avatar, a character design not unlike those seen on the Nintendo Wii.  Next, they can join or create a DJ room.  It is here where the magic happens.  The room itself looks like a cartoon version of a club / small concert hall– a dance floor at the back with a DJ booth at the front with giant animated speakers propping up the stage.  Users can hop up on the decks by clicking on one of the 5 available slots above the turntables.  Next, they can either select songs from the turntable database or even upload their own tracks.  Along with the other DJs, they will then be responsible for curating and delivering music to any other users in the room – who are all listening real time.

It is this concept of shared listening that drives the uniqueness of the platform.  No longer are you plugged into your own playlist, listening by yourself.  Suddenly you have the opportunity to stream your music to up to 100 people all at once.  It is akin to bringing the concert experience to the desktop (and mobile device with their app).  The idea that you listening alongside your friends or family or even strangers completely changes how you digest the music as it imitates the same “buzz” you’d experience at a live show.  Social mechanisms on the site also reinforce this.  A live chat window allows users to be in constant communication while a meter at the bottom lets them either “Awesome” or “Lame” a song – too many “Lame” clicks from the crowd and the song skips to the next DJ.  There’s a bit of an endorphin rush as a DJ when you start a track and the crowd starts responding excitedly in the chat window.  Additionally, when you click “Awesome”, your avatar starts to bob its head up and down – seeing a wave of avatars doing this in unison means the crowd is rocking out to your selection.  While this does not make one a digital Tiesto, it sure feels like it – and it’s that notion that keeps me coming back for more.

Find me on: www.turntable.fm (My username is Mateofish)

 

Playground

If we think about the streaming music spectrum, on one side is On Demand listening.  Spotify is the best example of this – a service that features limitless choice in song selection, and by definition enables the highest degree of customization in curating playlists.  Users must actively pick and choose what they want to hear by building up a playlist one song at a time.

On the other side is Leanback listening.  Pandora and other internet radio services sit here and require minimal user engagement – simply enter the type of music you want listen to, sit back, and consume whatever the service deems relevant to your initial query.

Music services have to date largely clustered around these two ends of the spectrum – presenting a gap in the middle that the team at Playground is looking to fill with their app called Playground.  Playground is based on the concept of personalized playlist discovery – the notion that people want to listen to music that is relevant to their tastes and preferences, while not wanting to have to build their own library.  From a user experience standpoint, playground’s mechanics are very simple and easy to use.  Upon logging in, users are presented with a beautifully laid out set of tiles that represent playlists that other users on the service have created.  Overlaid is the playlist name as well as a representative track – e.g. “Energy Mix” (Deadmau5 – Some Chords).  Like many streaming companies, Playground functions on an internet radio license – meaning that users cannot see the track ahead of them, and they can only skip tracks a limited number of times within a given playlist.

The nuts and bolts of the service are what drive its value beyond simply being a more social form of Pandora.  By using Facebook Connect, Playground is able to gather insights about your listening habits on other music services – and uses this information in conjunction with internal data in its algorithm to constantly deliver you the most relevant playlists on your homepage.  In essence, the service is able to offer users the best of both worlds – allowing greater pick up and play than Spotify, and analytics that have the potential to drive greater playlist relevance than Pandora.  As Playground Founder Vivek Agrawal notes – “With Spotify, the music content is unsurpassed in terms of volume, but getting what you want is difficult.  With Playground, we’ve provided a means to shortcut the playlist building process and allowing users to quickly get to the content they want.”  As the company begins to explore various business model functions around the service, Agrawal notes that a dual model makes sense – free with ads, while a modest monthly subscription would allow for exclusive content and no ads.  In the meantime, the company continues to hammer out new updates to its beta release so don’t miss out on being a part of the early user base by downloading Playground from the Apple App Store or checking it out their site www.playground.fm.

 

[1] SoundCloud CrunchBase Profile http://www.crunchbase.com/company/soundcloud

[2] Steve O’Hear, “Monetization Baby: SoundCloud Planning To Let Users Sell Tracks? Adyen Chosen To Power Payments (Updated).” Aug. 13th, 2012.http://techcrunch.com/2012/08/13/monetization-baby-soundcloud-planning-to-let-users-sell-tracks-adyen-chosen-to-power-payments/

[3] Alexia Tsotis, “Billy Chasen And Seth Goldstein: Turntable.fm Was Less Of A Pivot And More Of A Restart.” Sept 14th, 2011. http://techcrunch.com/2011/09/14/billy-chasen-and-seth-goldstein-turntable-fm-was-less-of-a-pivot-and-more-of-a-restart/


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