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July 1, 2013

I’ve been hearing these words a lot recently. “It’s just an app”.

It’s usually said with a dismissive tone by an investor or industry pundit.  Similarly, I’ve similarly heard entrepreneurs address this issue head on in the first 5 minutes of a pitch, and defensively say something like “don’t worry, this is more than just an app”.

My response has been pretty consistent – “what’s wrong with building an app?”

6 or 7 years ago, I heard a slightly different version of this: “It’s just a website”.  “It’s just an application”.  So instead, entrepreneurs and investors talked about trying to build “platforms” or “marketplaces” or something similar.

There is nothing wrong with building applications.  A search engine is an application. Youtube is an application. Evernote is an app. So is Dropbox. Most of the “platform” companies we think of started first as applications, and gained scale that way for quite a while.

So, don’t take the recent market skepticism around consumer companies as a reason to be sheepish about building an application.  Applications are great. But, the challenge is building an application that monetizes well relative to your level of ongoing user engagement.  Some applications monetize pretty darn well (Hotel Tonight for example), but most don’t,  which means that you just need to have a huge number of engaged users to build a meaningful business.  But that’s nothing new either.  When you hear someone dismiss a company as “just an app”, that’s code for:

“I don’t believe millions of people are going to use this product every day for a long time.”

That is the question that you need to figure out, because chances are they are right.  But it’s not a matter of whether apps are good or bad.  And it’s not like the challenges of building a big (non-app) company  isn’t significant either.

 

 

 

  • http://www.setfive.com/ Ashish Datta

    I think a key point though is how the app is going to monetize. An app like HotelTonight or Uber that aren’t making money on the actual # of installs have much different economics than someone hoping to sell their 99c one million times.

    • robchogo

      I think any mobile application that becomes a really large scale business will monetize through in-app purchases or some other premium features/storage model vs. charging for downloads

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