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The hyper competitive world of mobile apps

Views, 18 August 2016
In Ventures, Views

The hyper competitive world of mobile apps Sebastiaan Vaessen, Head of Strategy at Naspers. 

In today’s world of mobile apps, businesses should play to win or go home.

Leadership matters more than growth
When it comes to internet companies, only market leaders make money. When the whole market is growing, such as what’s happening in ecommerce at the moment, this is often forgotten. Growth is often confused with success. However, in any given industry, there is typically a direct correlation between relative market share and profitability. In fact, in the long run, it’s typically only the market leader (and possibly the close second) that makes disproportionate returns.

Long tail of losers
This correlation is even stronger in the world of mobile apps. We’re fast transitioning to an apps-centred world. All growth in time spent online already comes from mobile apps [see chart: ‘Apps are eating the world’]. This will accelerate further as the next 2.5Bn people from emerging markets come online and go straight to mobile.

The massive global scale of mobile platforms allows businesses to become 10X bigger, 10X faster than on desktop. Apps also present a very different competitive environment to the world of desktop. Just think about the way you shop online: On desktop people freely surf between different websites to compare different retail offerings allowing for multiple players to thrive.

In the world of mobile apps the 'long tail' becomes irrelevant [see chart: ‘Top apps win bigger’].  More industries will evolve from a ‘winner takes most’ to a ‘winner takes all’ model.

Despite the soaring number of available apps, a recent Nielsen study found that, on average, smartphone users only access 26 apps per month. In emerging markets this number is even lower due to the storage limitations of low-cost smartphones.  Your app has to be on the home screen if you’re to be market leader. 

Getting on the home screen, however, is not the end of the battle. The top of the mobile app world is a precarious place, as mobile apps are highly susceptible to disruption [see chart: ‘Apps more easily disrupted’]. There is no room for complacency in mobile apps.  All it takes is for another app to emerge, for example with a better user experience and a more compelling marketing campaign, and your whole customer base will shift. Established winners can have the rug pulled from under themselves quickly. A ‘winner takes all’ situation can quickly become ‘winner loses all’.

Learnings from the leaders
The nature of competition in the mobile world is changing and businesses that want to be category leaders are choosing app-first strategies. Companies from high-growth markets are leading the way.
Some of today’s leaders began their business on desktop before realising they could compete more effectively through mobile. For example: Flipkart in India realised that 80 percent of ecommerce in the country was conducted on mobile. As a result, it changed to an aggressively mobile-first strategy and built a strong leadership position.

Beyond those that managed to evolve from desktop- to mobile-first, we are increasingly seeing new contenders that operate a mobile-native strategy from the outset. These companies see app-first strategies as a means to disrupt slow-moving incumbents. In the US for example, mobile classifieds app Letgo is able to take on Craigslist purely because the latter failed to develop a proper mobile app.

In today’s world of mobile apps, businesses should play to win or go home.  In my next blog, I will explore how the nature of competition could change even more radically in the emerging world of chat bots.

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