The growing message in the popular media is that the opportunity to make millions in the mobile app space is receding, as existing players become more entrenched within the app stores. It’s also true that with both Apple’s App Store and Google Play now in a race to reach the magic 1 million available apps mark, it’s become much harder for independent developers to break through.
There’s truth to both these points, but they also focus on the negative, rather than the positive.
In the past 18 months, 2 mobile app companies, Instagram and Waze, have each been acquired for more than $1billion. Instagram’s initial app only cost $60,000 for the guys to make – 18 months later they sold it for that cool $1billion, and today that sale price actually looks a really smart deal by Facebook. Not only has Instagram established itself as the leading photo app, they’re conquering the video space and Facebook’s own native apps have presumably benefited from having Kevin Systrom and Mike Krieger within the tent.
Waze had been around much longer, having been established in 2008, but it should give encouragement to each and every start up outside of California. Here’s an Israeli company, whose model was to create a platform to crowd source mapping and traffic data. Whilst they’d begun to monetize that user base (in contrast to Instagram), their valuation owed far more to the value of that mapping data to the buyer (and the buyer’s competitors), than the ability to directly monetize it.
So, that’s 2 companies in 18 months sold at over $1billion.
The odds of winning the Powerball lottery in America are 1 in 175,000,000 – the largest ever jackpot of that lottery was an estimated $590million.
There are approximately 900,000 apps in the app store. The businesses that exist as 2 of them, have both been sold for over $1billion. That’s odds of 1 in 450,000 for almost 2x the return.
Okay, making a great app requires more imagination, skill and effort than buying a Powerball ticket, but it also requires 388 times less luck and, even if you don’t join the Billion Dollar Club, you’d have learnt a whole lot and enjoyed an incredible journey along the way.
To quote the Paypal Co-founder, Peter Thiel, from his Stanford class on the luck element in startups (brilliantly document and shared by Blake Masters in this recommended series of Blog posts)
“A class on startups would be worthless if it simply relayed a bunch of stories about people who won lotteries. There is something very odd about a guide to playing slot machines. To the extent it’s all a matter of luck, there is no point in learning very much. But it’s not all a matter of luck… Luck isn’t something to circumvent or be afraid of. So we have class 13. We’ll dominate luck.’
That’s what prompted us to develop a Course teaching people how to make a mobile app – the more you know before you start, the better your own chance of dominating luck.
In my next post, I discuss the data that demonstrates the opportunities to make billion dollar apps are going to accelerate over the next few years.