The value of substitution

I’m consuming a lot of information on mobile markets at the moment. Both in a stream (e.g. from @pmarca’s tweets) and in discrete chunks (from @benedictevans and @mattermark and so on). I firmly believe that when presented with a sea of data, many perspectives are more valuable than one. Silos make wonderful echo chambers.

I was struck by an observation early on a few mornings ago, which I tweeted to @benedictevans. That tweet forms the basis of this post.

Consider the last few big consumer mobile tech exits, the ones with multi-billion dollar valuations that drew out the “bubble” comments. I’m talking about WhatsApp, Instagram, and (nearly) Snapchat. Also consider the recent big early VC investments (in consumer mobile) — Cyanogen, Everything.me and so on. All take core functions of the mobile device and either improve them or directly substitute them. This may be due to the restrictions of the form factor, or possibly because it allows easier consumption on the part of the device owner. If they can see and understand that an app is an analogue of something that they already use and find familiar, they will find it easier to substitute and adopt. Indeed it may be that the form and familiarity work together to make substitution easier. Most mobile and tablet users will not explore their file systems in the way they might on a desktop because they were vaguely au fait with navigating through an Windows XP (Cyanogen would be our exception here). The working of mobile devices is far more opaque. Therefore for the casual user - our “normal” - the effect of the application is much more important than the specifics of its operation.

What does this look like in practical terms?

I believe it would manifest in a range of applications that were essentially identical. They would mimic the manufacturer/OS creators standard applications, with deviations that made them similar to other platforms. This is largely what we see — go on to an app store and search for “calendar” for example. Of course this homogeneity could be as a result of the creator’s desire to mimic successful apps — “the flappy bird effect” — but it should be possible to see when apps were added compared to when the one they’re mimicking was.

How can we take advantage of this?

Looking at it from an investor’s perspective, it should allow a bit more of a feel for likelihood of widespread adoption. For a consumer product with a wide base and a small increment business model then sticking close to a core function should mean that there is less of a barrier to adoption.

As an entrepreneur, it gives a direction both for product design and for likely exploitable niches. You look at what core functions aren’t currently being widely substituted, consider the frequency and type of use (possibly how casual the use) and then create your replacement accordingly.

For example — core functions and examples:

Calls

Camera (Snapchat, Instagram)

SMS

Chat (whatsapp, Kik, Skype?)

Internet connection / Browser (Chrome, Opera)

“Sharing” (Twitter, Facebook)

OS

“Streaming” (Youtube, Spotify, iTunes)

To a lesser extent:

News (Flipboard)

Weather

Games

Calendar

Clock

Calculator

It seems clear that the functions that have the big, familiar names are those that seem most easily divorced from the function of the phone, or the device’s handset. They’re the frivolous add-ons compared to the nuts and bolts of operations. There are some functions where either the uptake is so small, the sheer volume of apps means no clear winners. Perhaps it might be possible to carve out a nice in those, but it would be a battle in such a saturated space. My feeling is that you could see a big player emerge in (for example) calls or SMS, but it would involve either convincing your market it wasn’t impacting your phone/contract or substituting it so subtly that the user didn’t notice (I’m aware there is some crossover between chat and SMS apps). The other possibility for a widely-adpoted success is some hybrid of other sections — examples of these are things like Facetime in IOS — it ticks boxes in streaming, sharing, calls and arguably others.

What would future Apps built on this observation look like?

Mashing together functions gives you things like Streaming/News — an app for vlogging or citizen journalism or Camera/Sharing — an app for creating “carousels” of user pictures and so on. I think some more thought on these could well be a project with real value.