Startup pivot: from mobile to web application

A discussion has started among venture investors and angels about the failures of startups targeting mobile projects. On this topic, you can read the posts of Fred Wilson and Om Malik . I, being a co-founder of a startup that started with a mobile application , want to share my thoughts. At the moment, we raised $ 3.65M and launched two free mobile social apps. Nevertheless, we will launch our next application first under the web .

Advertising is a digital tax for users who want to use apps or websites for free. Almost all free services and applications have built-in ads. Companies that live in advertising are similar to the state in the sense that both of them succeed in collecting fees without an obvious attempt on your wallet. Most ordinary taxes are levied automatically on the basis of a payroll, so people do not yet associate this money with theirs. Similarly here: it seems to us that if we do not pay for something directly, then it is free. But it is not so!

Unlike taxes, services with advertising revenue are aimed at low-income audiences and basic user skills, because they make their money on them. Take the most obvious example: Google earns $ 30 ARPU (Average revenue per user) per year and earns on average about $ 1 per click. Those. about 30 clicks per user per year. I don't click so much like you. I usually know where content ends and advertising begins. In part, because I use the Internet longer than others. Moreover, I believe that advertising is aimed at the same audience as the Nigerian scrammers (on average). You can read Quora on this topic, it is interesting.
')
But what does the user pay? He pays his privacy, and the likelihood in the future to lose it as a result completely. It can cost tens or hundreds of thousands of dollars. Advertising revenue companies require a large amount of data (about users) to get advertiser money. Your data is most often transmitted in an aggregated form, so no specific personal data is shown or sold to the advertiser directly. Usually they give the argument that your data is being sold for which I do not have any rights. But if this were true, then the users would have to rebel in the same way as if they had to go to their bank accounts annually and transfer 20-50% of it to the state so that it could spend, for example, on a security program at airports (so that after that you can stand in a queue and get a good look at you) (a very philosophical metaphor, the meaning of which is that there are things that need to be done, even if you don’t directly benefit from it. misunderstood the author. - approx. erevodchika) I have another reason: because it is a way in which companies from advertising revenue may exist and grow, your data is at risk.

In order to get enough data that would be statistically significant for the advertiser, as well as to reach the scale necessary for a large enough audience with low incomes and skills to successfully click on ads, such companies must increase a very large user base. They need to increase the base very quickly, especially at the very beginning, because no one will agree to pay the costs of maintaining a slowly growing and expensive IT company for a long time. To raise venture capital in the post-sowing stage , you need to show rapid growth. And you will not find many companies with advertising revenue (in the IT sector) that would not fail to raise the money for venture investors.

Thus, ad revenue companies need to grow quickly and widely to ensure that their product is “free of charge”. And now let's talk about “acquiring” users. If you are working in a startup, you must have these funnels, and you will confirm my words. Ultimately, this whole process is aimed at preserving the user throughout all stages of his life cycle. If you are not focused on this, then at every stage of your site or application, as well as its usage scenario, you will lose a percentage of users. And I believe that this is the main reason for the failure of mobile applications!

Let me share some numbers of our startup, who first launched the mobile application. Out of 300,000+ installations and 250,000 site visitors, 200,000 users have registered. Without departing from the cash register, we cut off 60% of the audience who came to gawk at the shop window. By the way, in a private conversation, I heard from an application developer with more than 100M installations that 50% of people did not even open their application after installation! And this is not counting people who could not find your app in the App Store or decided not to download it after they saw the rating (different from 5 stars). Even if it is 4.5.

We had a screen where users could specify their phone and email to make it easier for other users to find them. Of the 200,000, another 25% fell off. They did not have enough patience or they were afraid that their phone numbers would be sold. We also had a social network login screen to automatically create user groups. Another 25% did not want to log into your account. Perhaps because they did not find the “skip” button or just got tired by that moment. Since then, we have removed these two screens, but some time passed before we did, because we had to rework the “adaptation” process.

Thus, the initial 550,000 turned into 100,000 users. Now that the user is already in the app and has created an account, we want him to create a group and add his friends or family members there. 25% - will not create a group, another 25% - will not add anyone to the created group. Now we want them to share something with these people. After that, the people with whom they scammed something, they will see it, understand what is happening, and will go through the above described registration process.

With the best scenario, we managed to save 5%. Attempts to fix this led to nominal improvements. And in this problem we are not alone. Even among other applications with better “adaptation”.

The most natural way to fight is to try and increase the number of installations. But it's expensive! If you pay Google for $ 1 CPC to get people into your funnel, your user’s actual cost is $ 20! And you will never stop these expenses. Simply optimizing the registration process and “adaptation” will not be enough, because in the case of a mobile application, you cannot quickly deploy updates and respond to user behavior in order to check out a bunch of things. Inactive users usually download only large updates that take months to develop. And versions with bugs can not be sent - the rating will suffer. Also, you have already lost some of the potential users who got lost in the funnel, and there is no normal way to ask them to come back and try your new funnel again. And the press will not write another article saluting your new funnel. E-mails to users have very low conversions, and no matter what tricky tricks you use. The user has already figured out in his mind how long it will take to go to the App Store, find your app, download it, enter a password, start it, register, etc. And since this is not a damn thing fast, he will just score on it.

In general, mobile applications turned out to be a terribly harsh place to close the viral loop and win the battle to save users. Only a few applications have succeeded in the strategy “first mobile application”: Instagram, Tango, Shazam, maybe 2-3 more. (Games do not count - they are aimed at short-term revenue, but let's skip this topic). Take the same Path: one of the most promising mobile startups. I do not want to detract from dignity, because I love this application, but this is a good example. Or Color is also a great example. With 5-10M downloads, Path was able to save only 200K / users per day (according to AppData). You yourself can check that they have dropped from 5th place to 94 in the category of social networks. In any case, the “retention” of users at the level of 2-4%, i.e. Now they have a couple of hundred downloads per day. Even if I made a mistake 5 or 20 times, still this business has no future. A sophisticated user of a social network is not the most appropriate type to click on ads. According to BusinessInsider Path, DAU has 20% and MAU - 50%. But essentially it does not change.

A web application is a completely different story. You can test it painlessly, cheaply and fast enough. You can fix the critical bug that causes the application to crash when it starts up, 15 minutes after detection. You can show 10 different start pages and decide in real time which one is best for you. It is easier to close the viral loop: the user can click on the soap and immediately start using the application. You do not need to specify additional parameters in the download link, and users do not need to download the application from a computer to a mobile device. In the absence of obstacles when downloading and running the application only to test it, it is easier for you to demonstrate its value to users. For example, like Google. Moreover, registration in a web application is much more convenient in all senses. For example, there is OAuth. You can tab goes to the next field. Self-completion forms are a feature available in every browser. The open web eco system and 20 years of innovation have already solved many of the most difficult aspects of registration. For mobile applications, these innovations are lagging far behind, since we are developing applications for the great indulgence of two companies, none of which has a particular interest in helping developers of free applications to achieve success.

As I said, companies with advertising revenue should grow large, fast and at the same time due to your privacy. He brought the case to show why web projects are easier to acquire and save users. This is achieved by the ability to test and communicate the value of the service to the user quickly and clearly. All companies with advertising revenue will innovate again and again to achieve minimum registration time, minimal friction caused by user actions, and a maximum viral effect, as this contributes to growth and increases profits.

To achieve the minimum time of the first launch, the user in well-thought-out usage scenarios will be shown well targeted lists of prospective friends or will not be asked to register at all. Also, users are shown interesting and relevant content without departing from the box office, which will require a large amount of visible public content. To achieve minimal “friction” when using a service, such as searching or sharing, you will not be offered advanced sharing options, and in some cases will post automatically on your behalf (FourSquare). And last, to increase the viral effect of the application, invitations will be sent out invisibly automatically, and the results and content will be available to any user.

Unfortunately, your privacy is an additional option, which in most cases prevents the realization of one or all of the goals of such a company. No one would like to fumble without an audience, read news without content, search and not receive a search result. In other words, the point is that Google and Facebook need your data, information and content in order to be able to show something to other people.

The cost of this to the user is fundamental. Unfortunately, we do not feel this value until it is too late to do anything. A blog post can cost you a job, a tweet — a relationship, rather than an erasable search result — both.

So what can you do if you are an entrepreneur or are involved in a mobile startup that does not receive the metrics it deserves? I can not say 100%. We still understand this in our company. I don’t want to promise anything, but I’ll tell you what we think about at Origami Labs and what we’re working on. Perhaps this will lead you to some thoughts about your project.

We want to put all our chips where we believe that we have the greatest chance of success, based on our assumptions and data. And mobile devices are not our bet. Therefore, our new service will be launched first under the web (in a couple of months) with the subsequent launch of the mobile application as a companion, add-on. Yes, we are making a big bet on the web and the Internet as a whole, for the reason sounded above. We also do not free service, because believe in privacy. The audience will be smaller and slowly growing. Our new service will cost you money, so you can be sure that there are no other hidden costs.

In conclusion: I do not think that the mobile market will stop growing. And we have not turned towards the web, because people use it more than mobile applications. I use my smartphone more than any other device. I just do not think that an entrepreneur who is focused on success should start building a business there. Android and iOS platforms help us fail, attracting us with the illusion of an immense number of users, but in fact you have to fight for them much harder than it is worth it. Yes, you most likely need a mobile application to satisfy users and competition, but it should be only part of your strategy, not an end in itself.