Mobile Apps - Boom or Bust? Sherman, please set the Wayback Machine for 1994, and then 1853

March 9, 2011    

In the last few days, I’ve seen reports that Mobile Apps are repeating the 1996 expansion, and reports that Mobile Apps don’t provide a viable business model. I think that ¬†there are elements of truth in both articles, but I don’t think either is an adequate depiction of what I’m seeing. Let me see if I can explain.

Like others, I feel like I’ve been here before, but for me the year wasn’t 1996, but 1994. That year, I was a consultant in Dallas Texas, mostly hooking up Internet connectivity and web servers for companies that nothing to do with technology. At one point I literally couldn’t introduce myself to people without having them say, “Did you say that you do websites? I’ve got to get a website for my business. Can you help me?”

Back in the present, I’ve recently gotten my third phone call in as many months from a person I’ve never heard of, saying “I heard from (a mutual friend) that you write iPhone apps. I’ve got to get an iPhone app for my business. Do you think you could help me?”

Now it’s definitely true that most Apps don’t generate enough revenue to make back their development costs. But that’s okay. In 1994 (or 1996 or 2011 for that matter) most websites don’t generate enough revenue to make back their costs. And I haven’t seen any evidence that people are no longer building websites. Most companies these days see having a web presence as a necessary cost of doing business. And many are starting to look upon Mobile Apps with the same thoughts.

To me, the example for making a viable business out of Mobile App development is to think not of 1996 or even 1994, but California, 1853. Gold had been discovered and the Gold Rush was on. Prospecting for gold, like the App Store, was “not a viable business.” Very few of the people that went prospecting ever made a lot of money, and many of them ended up in debt. You’ve likely never heard of any prospectors, but you’ve heard of at least one viable businesses from the period: Levi Strauss & Co.

Then, as now, the people looking to strike it rich will largely fail to do so, but now, as then, a viable business can be made from providing services to the prospectors.