Why we will still invest in Smartphone apps
There is a lot of pessimism in the startup community about startups building apps. We’ve been hearing that “apps are dead” since as early as 2011. Reports warn of investors who “may be tiring of mobile apps” and senior engineers who predict that “in a few years […] native apps will be mostly dead.” Gartner says that usage is going to plateau because users are unwilling to devote time to new apps. Indeed, a recent Comscore study found that a majority of users (51%) don’t download any apps in a given month:
Another source of pessimism is the dominance of Facebook and Google. Together they own 8 out of the top 10 apps. There can be only ten apps in the top ten by definition, and unseating these giants is hard.
Critics say it is impossible for a new app to break through. Empirically, they are wrong.
Here are five Apps that have gotten to the top of the App store in the last two years without meaningful ad spend:
Critics have claimed that growth is impossible in the current environment, but they are wrong. Apps can still break out through word of mouth. If they have the right product hooks, they can get viral growth. Of course, not all of these apps have stayed at the top of the app store, but that is about a whole different vector, engagement. To build a great company you need both growth and engagement. Step one is growth.
This growth has led to some interesting outcomes. Look at Musical.ly’s sale for $1bn, Pokemon’s cash cow machine, or the TBH sale and you’ll see the incredible opportunities that still exist for businesses in the app store. Of course, not every app will see this sort of success. The vast majority won’t. Startups are hard. But success is still possible.
App Annie recently reported that the global app economy will be worth $6.3 trillion by 2021, up from $1.3 trillion last year. During that same time frame, the user base will almost double from 3.4 billion people using apps to 6.3 billion, with time spend on apps growing to to 3.5 trillion hours in 2021, up from 1.6 trillion in 2016. With that kind of growth still ahead, we at Lightspeed are still excited about investing in extraordinary teams building extraordinary apps.
If your app has hit at least 10k DAU with strong engagement (25%+ DAU/MAU, at least 3 sessions/day), retention (30%+ d30 retention — that’s d30, not month 1) and growth (30%+ month on month growth), I’d like to hear from you!
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