What Gates profited from was the move from mainframe to personal computers. The next significant move in the industry (and one which Gates himself has admitted he nearly missed) was the move from personal computers to the Internet. A key date here was the release of version 1.0 of the Netscape Navigator browser in December 1994. Back then, access to the internet was mostly via dial-up so for anyone not in a telco or university environment, time on the net was very restricted. Really the best place to be then was a postgraduate student in a scientific area, preferably in a department located away from the main campus. There you could enjoy 24/7 access to a PC connected at a decent speed to the information superhighway and spend days into nights browsing sites like NASA and CERN or posting to newsgroups beginning with alt (e.g. alt.binaries.multimedia.startrek). I know about this because from September 1994 to July 1996, this was more or less my life. And I know I wasn’t the only one as I often ask people I meet in the technology industry: how did you get into computers? The answer, more often that not, is the sad tale of an unfinished Masters or Doctorate along with a happy tale of how time spent avoiding work on your thesis had lead to a very interesting career.
So when I did graduate and move to London to work for a US Tech company, I already had a fair idea how the Internet would change things. I soon got involved with a group my new employer was putting together to look at the threats and opportunities these new technologies presented. My mind went back to these times last July when I read the news that Borders, the US bookstore, would be closing their 399 remaining stores and laying off about 11,000 employees. One of the few things you could actually demonstrate back them was buying a book online. The reaction was almost always the same: Why would I want this? Can´t I just go to into a shop to buy? I was absolutely convinced that one day people who buy most things in the way they do now but if you hadn´t spent the time getting your hands dirty with the technology, I could see why a 50 year old executive found it ridiculous to have to listen to a kid half his age explaining what was going to happen to his business.
Sixteen years later and I´m in a conference room in Madrid, listening to a pitch from an entrepreneur and I´m asked to take out my phone. Out comes my Blackberry Bold, a recent model through which I connect to the cloud everyday for GMail. Twitter, Foursquare etc. I have even gone to the Blacberry App World to get What´s App, Evernote and AccuWeather. The pitching entrepreneur audibly sighs. “There is a problem for you to understand my business, I have to talk about a world that none of you know”. At that point I felt my arms grew shorter and my skull bigger, balanced only by a long heavy tail. For I had become that dinosaur, a species I had once decried. Surely not me? For though yes I am married with kids, I still play football, not golf. Listen to Mumford & Sons, not Coldplay. and go to Ibiza, not Benidorm. But he had a point, I had neither an iPhone nor an Android device in my pocket. I was not the guy in the room saying “there´s an App for that”
To the Internet therefore and a look into this brave world of Apps. The first doh moment for everyone should be the market cap of Apple. $790 billion and rising, no debt and $100m in cash. Clearly a serious amount of these iPhone, iPod and iPad things have been sold. Then I see that on the 3rd of March last, the App Store had a message to say that 25,000 million Apps had been downloaded. To make sense of that number start with the total population of the world 8,000 million or more precisely there were 2,267 million internet users. Twenty Five billion is ten Apps for every Internet user and that doesn’t even include Apps on Blackberry or Android. So what we have therefore is not Tomorrow´s World or Jetsons type futurology. This is here and this is now. I left the meeting thinking that before I make any further investment decisions, I should extend my technology competencies beyond what I get from IT or what the other parents are using as they wait at the school gates to collect their little darlings.
Mobile First, Web Second
Actually the above story is kinda sorta made up, especially the recent parts. I do at least have an iPod Touch, where I download Apps, even if I don’t carry it with me every day. I´ve also read the Fred Wilson post. Fred is New York City based Venture Capitalist, a guy about whom has been said, Life of Brian style, apart from Twitter, Foursquare, Tumblr and Zynga what breakout early stage companies has Fred ever really invested in? On September 3rd last Fred wrote a post “Mobile First, Web Second” which he followed up later on November 23rd with another one titled “Mobile First, Web Second (continued)” The first post was a more of a musing but by the second he was convinced. To quote him in full: “The thing I like about these kinds of Apps is they are with you all the time and can be used in moments of downtime. As such they lead to higher levels of engagement. But because they are also web apps and connected to a web scale network, they can offer a lot of value that mobile only apps cannot” Note closely what he is saying here. He isn’t saying it´s all about iPhone Apps from the App Store. What he is saying is that the mobile web experience should be the primary user experience designed for, especially as last month for the first time more smartphones were sold than PCs. In January last, another influential VC blogger, Mark Suster gave his take on the debate calling his post “Web Second, Mobile First”. Though he didn’t refute Fred´s argument, he did strike back for the conventional web, while acknowledging that having your mobile with you all times makes it a potent device.
So if most VCs get the mobile revolution then what´s the big deal? Well here again I turn to my own experience, this time in a Business Plan competition. After a presentation on a last minute hotel booking App, the Simon Cowell like response of another VC on the panel was that this is “a feature not a company”. To his credit the Entrepreneur summoned his inner Will Young to retort “You’ve probably underestimated just how big this is” and mumbled something about reading Flurry sometime instead of Golf Digest. And indeed one follow of @FlurryMobile later and you start to realise why VCs are indeed funding mobile app companies. To take two examples, Hotel Tonight in the US have now taken in $12.3m and in Germany JustBook have secured what Techcrunch Europe called an “unusually large angel round” Presumably Accel Partners (Hotel Tonight) and the brothers who co-founded Dailydeal (JustBook) are investing in more than just a feature.
Fast forward to the recent London Web Summit, insert one gloriously coiffured Australian and all over the LWS hashtag we´re got retweets of the phrase “Apps are a rubbish concept”. Defending his view, AOL’s Digital Prophet David Shing believes HTML5 should replace them all adding “What’s important are M-sites”, the mobile internet. After all, there are two billion web users versus fifty million iOS users. Supporting him, it could be argued is the author of The Innovator´s Dilemma, the most sacred text in technology. Clayton Christensen is famous for saying that “Apple's proprietary strategy will soon fail” meaning in this case that what Apple initially gains by controlling the entire user experience hurts them as they try to scale. Once the technology matures, competitors are both able and motivated to catch up.
So What Should I Do?
I no longer have the expertise to make any claim that the future lies with the web, with native mobile apps or with the mobile web. What I can report are comments from companies who have invested in an App for iPhone, iPad or Android that are experiencing better than expected results. I also know that there is a generation coming that are App first and will almost certainly take advantage of what is different about the mobile experience to build companies with disruptive business models. So if you don’t have a decent smartphone, it´s time now to get one and to start downloading Apps. Maybe also make more of an effort to chat to anyone of your acquaintance under 25 (even if they seem to watch such awful dystopian films).
It´s Friday after work and I´m eating tapas with a grizzled veteran of the Spanish tourism industry, a man whose world has long consisted of catalogues, travel agents and the annual trade fair. As the G&Ts arrive out comes his iPhone to snap a pic of the label on the tonic bottle. “What are you doing there?” I asked. “It´s a Gin Tonic App. I take note which gins go with which tonics. There is a lot of variation out there”. “And do you have many other Apps on your phone?” I ask “Not many but I use the ones I have” he answers adding “We in the travel business dragged our feet when the web came in and let others make the money. We got the web all wrong, so we´re going to do Apps right”
Images courtesy of 3777190317 and Ken Durden at Shutterstock.com