The act of “bundling” and the unleashed energy created by “unbundling” are both powerful forces. As consumers, we’ve all been subject to the bundling powers held by companies with unfair regulatory advantages, price collusion, and less competition every time we look over our monthly cell phone bills or cable bills. Years ago, the first software product I worked on was mildly successful, but didn’t have any real competition, so over time, our incentives were to add features and services that fit into pricing tiers to hopefully maximize our rent. Here, the bundling entity accrues power, but only until external forces and competition create enough pressure to trigger some form of unbundling.
Over the past few months, two blog posts written by investors at Union Square Ventures have been on my mind as I spend more time on the venture side of the table and evaluate new mobile applications hitting the market. In mid-August 2012, Albert Wenger wrote a short post about how mobile devices “unbundle” web services, the prime example being Facebook and the rise of Instagram. Later that month, Wenger’s partner, Andy Weissman, advanced this line of reasoning, arguing the unbundling power of mobile could do to the web what the web has done and is doing to other industries.
In today’s world of “mobile first” thinking, there are deep consequences as a result of the forces discussed in Wenger’s and Weissman’s posts. For the past year, this shift has generated a variety of reactions. Some want everything to be “mobile first,” while others want people to “stop making apps,” and mobile app discovery grows as a pain point. External forces impact this, too. Today, it’s relatively cheap to build, distribute, and sustain in perpetuity a mobile application. Today, the overall economy and labor markets are still struggling, while startups are a lifestyle and the hip thing to do in many cases.
The result of all these forces is that we have massive competition in every category imaginable. This is why, when I ask on Twitter about cool new recipe apps, I receive over twenty replies, each suggesting great apps that aren’t marginally different applications which, more or less, do the exact same thing. There really is an app for everything, mobile services that can fill our needs for one week and then be relegated to a back page or deleted off the phone entirely after.
What does this all mean? It means that in many, many cases, many different players in this ecosystem may need to recalibrate their expectations. This is where Weissman’s posts shines, as he suggests the following: (1) that mobile will fragment audiences, implying that reaching network scale may be more elusive; (2) that mobile users will always be serviced and satisfied by similar apps in every category; (3) that those people actually building apps (as featured in today’s New York Times) may have to adjust their expectations about creating a venture scale business versus creating a lifestyle business; and (4) that investors in these services and apps may have an incentive to wait until apps truly “breakout” before investing traditional venture capital because those styles of returns may prove elusive for some time.
The one big caveat here is that the rate of growth of mobile devices worldwide may create an environment where even some seemingly fragmented audiences may reach a level of scale that surpasses what would have been possible on the web, but without the aggregation and winner-take-all benefits the web confers. I actually believe this will happen, but that it will take some time to get there. In all of the talk swirling around mobile disruption, download growth, retention metrics, and so forth, the most valuable attribute of app builders today may, in fact, be patience — the ability to understand this new, unbundled environment; to accept its new laws and fragmented audiences, and; to harness its scale and reach to create the next breakout the world doesn’t know about yet.