Platform distribution risks

When your product extends a platform’s functionality, one of the main risks you face is that the platform could embed your product’s key features within the platform – what is sometimes called subsumption risk. This happened to a lot of startups in the 90s that built products for the Windows platform.

When you depend on a platform for distribution (acquiring and retaining users), you take on different risks. Specifically:

1) Oversaturation. The risk that supply of products on the platform significantly outpaces demand. This seems to have happened recently to the iOS App Store: there are over 500,000 apps and counting, and popularity tends to be highly concentrated, making it very difficult for new apps to get noticed. Oversaturation also happened to Google (organic) results in most query categories in the last 2000′s.

2) Barriers to discovery. The risk that the discovery methods on the platform aren’t meritocratic. iOS apps depend upon appearing in iTunes’ Top 25 lists, leading to a “rich get richer” bias, along with aggressive attempts to game the system. Apple has other app discovery mechanisms like its Featured Apps and Genius features, but those seem to drive far fewer downloads than the top lists. Google search has increasingly been favoring Google’s own products and also seems to heavily favor older, well-entrenched websites, making it very hard for new sites to gain significant SEO traction. Currently, social networks like Twitter and Facebook seem to have the most meritocratic discovery mechanisms, which is one reason so many startups target them for distribution.

3) Throttling. The risk that the platform will throttle distribution or monetization (for apps that rely on paid advertising, throttled monetization also means throttled distribution). Facebook started out letting apps send unfiltered notifications to users’ timelines but then introduced algorithms that heavily filtered them (thereby entrenching the position of leading app makers like Zynga). Facebook also started out letting apps charge users directly, but later changed that policy and imposed a rev-share.

If you are launching a new website or app, you should have a distribution strategy beyond just “people will love it and tell their friends about it”. Your strategy should probably involve at least one major platform. And you should think through the distribution characteristics of the platform and decide if they are a good fit for your product and how best to mitigate the risks.

Finally, it is worth noting that some of the most successful startups grew by making bets on emerging platforms that were not yet saturated and where barriers to discovery were low. Today, the most interesting new platforms are probably Android tablets and emerging social networks like Foursquare and Tumblr. Betting on new platforms means you’ll likely fail if the platform fails, but also dramatically lowers the distribution risks described above.

http://jakemintz.com jakemintz

I hear over and over again some version of “iOS apps depend upon appearing in iTunes’ Top 25 lists, leading to a ‘rich get richer’ bias” (Fred made a similar argument a while back). Can you elaborate? What is your evidence?

Every week lots of apps fall off the top 25, and every week there are new great apps that make it onto the top list without paying for the position or getting an editorial blessing from Apple. Lots of apps that clung on for a long time are nowhere to be seen now. Our own data says less than 25% (and that’s conservative, I think it’s quite a bit lower) discover Bump through the top lists (although thats 4X more than through press mentions). Personally I think the apps that stay on those lists *are* the ones people love and tell their friends about.

Whenever I hear people complain about this I worry they are looking for an excuse when their product is actually the problem.

But I could be totally crazy and our experience at Bump is definitely not the norm. Maybe this is true for the most downloaded apps but not true when you are trying to get discovered. Or maybe it’s only true for apps that are two player only.

Then again show me the great apps that aren’t getting users only because they aren’t on the top 25 list and I bet I can show you 25 apps users love more.

Are you in the bay soon? Have some exciting stuff would love to get your feedback on.

http://www.cdixon.org chris dixon

I’ve thought about your specific case (Bump) and really think your app is an outlier where people tend to talk about it verbally because it is such a physically visible app (people bumping).

My main evidence are games. I play a lot of iOS games and find them on places like TouchArcade. I see very little correlation between great games and the games on the top lists.

http://jakemintz.com jakemintz

Fair. Two more thoughts: 1) games and utilities have very different lifetimes and that changes how the lists impact them 2) you may like different games than the average iOS user.

Pinterest and Voxer climbed the lists quickly, but Instagram did very slowly, and didn’t seem to have problems acquiring users when it was not a top25 or top50 app. Maybe these are all outliers too. Almost everything I think I know only relates to the Social category.

http://twitter.com/gustaf Gustaf Alstromer

Howdy,

Gustaf from Voxer here. This discussion is super-interesting! If your app depend on other people in order for it to be useful you will rise quickly through the ranks once people start using it.

To get to that point might take a long time. We launched the first real version of Voxer about a year ago but didn’t start to take off anywhere until the summer and in the US until November.

Instagram is useful even if I only follow 10 distant friends and Justin Bieber. If you start using Voxer and find it useful you will almost immediately tell your close friends about it since those are the ones you communicate most with.

Last time I checked top 25 overall i think at least half of those game where ad-driven in one way or another. I wonder if the fact that the top 25 on Android is different is because it’s ranking algorithm or that it’s simply less attractive to gaming companies?

Btw, Apple didn’t feature Voxer in the App Store until we’ve been #1 in Social for over 2 weeks

http://www.facebook.com/ChristianArca Christian Arca

Being a mobile game developer I can definitely say that not being in the top charts makes it extremely difficult to acquire players in the iOS marketplace.

We have found that oversaturation and barrier are the biggest issues we need to face every day. Through talking with other game developer friends of ours most titles that are featured peak and after being out of the featured lists decline over the course of 3 days to a much more conservative number of downloads per day. Additionally – if you are out of the top 400 ranks it can be quite difficult to gain traction.

If you take a look at the top grossing ranks you can see that they are sometimes quite volatile and are very much based on the amount of media that is bought for those apps to attempt to keep them in the top grossing ranks.

To deal with these platform concerns we’re making sure that our game designs inherently deal with these barriers directly.

Anonymous

Christian, curious to hear what you mean by ”
e’re making sure that our game designs inherently deal with these barriers directly.” - How do you do this?

http://www.cdixon.org chris dixon

I’d also mention that a lot of the top 25 apps are pretty scammy. Night vision goggles, battery life saver, etc. Apple started clearing some of these out but there are still a bunch of sketchy ones.
http://www.cdixon.org chris dixon

also, yes, hope to be in bay area soon and would love to see what you guys are up to!
http://twitter.com/andyidsinga andyidsinga

I heard about bump through coworkers … i hardly ever look at top lists.

Anonymous

Chris, very interesting post.
One question: while it’s true that MS crushed a whole bunch of companies by incorporating their product into Windows (eg Novell, Netscape, etc), that doesn’t seem to happen with web platforms. I can’t think of any big example of a start-up disappearing once FB or Google launches the equivalent feature. Users seem to stick to their favorite app and not use the feature.
One possible explanation is that in the old world, distribution/availability mattered a lot more – users would default to what is installed on their machine, whereas now they’re much more willing to download or activate an app.
What do you think?
Anonymous

‘…you should have a distribution strategy beyond just “people will love it and tell their friends about it”. ’ - Key takeaway.

If you are launching a new service/app/game & you haven’t considered distribution as a key factor in your product design, then you are already in trouble. I couldn’t agree more on betting on new platforms part. Tumblr is a great example of a big yet oft ignored platform.
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http://twitter.com/lchamberlin Luke Chamberlin

I hear #2 often but I wonder to what extent the top 25 list on iTunes affects discovery or popularity. If we moved to a top 50 list or top 100 list or no list I’d be willing to bet that the top downloaded apps wouldn’t change by much.

If you look at most markets, the top X products in a given category will have 90%+ of the business. It’s a basic distribution curve. I think you could get rid of the top 25 list and you’d see roughly the same distribution of apps.

Another factor here is that the top apps are increasingly social, especially games. And even what we thought of as “utilities” have their own social networks (i.e. Instragram). The network effect compounds the “rich get richer” bias even more.
http://twitter.com/iamnoskcaj Jackson

Distribution != Marketing/Promotion/Advertising/Value.

I understand the concept of jumping on a new platform, to avoid saturation, to stake a claim in popular categories that will likely fill up as the platform matures… but if we’re being honest, distribution is a small part of the equation. I don’t think apps fail because they’re not in the top 25 lists. They fail because they’re poorly designed, or they’re not marketed well, or there’s little to no value proposition.

http://www.cdixon.org chris dixon

Probably true. But as a gamer I find lots of great games that I think are objectively better than the top games like Angry Birds but haven’t gotten popular. So not convinced it’s a meritocracy.

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My impression is that since the barrier to entry is low, it might be easier to start a lifestyle business around existing platforms, but to create a truly massive scale business you will often be at the whims of the platform you are building off of. Obviously Zenga has done that successfully and is branching out, but it’s not going to work for everyone.
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Chris Dixon