The State of Apps - a16z Podcast  ## Metadata - Author: **a16z Podcast** - Full Title: The State of Apps - Category: #podcasts - URL: https://share.snipd.com/episode/a173a72c-524f-40a0-8b5d-07b7cfb77b76 ## Highlights - How to Succeed with Word of Mouth Marketing Key takeaways: (* Word of mouth is still a powerful way to acquire new customers, and it's harder to do it than it was in the past., * New platforms like TikTok are good for now, but they will become more expensive over time.) Transcript: Speaker 1 I see word of mouth is kind of the purest maybe form and most lasting if you can get it right form of acquisition just because the barrier that's probably hardest to overcome. Like, I mean, you can pay people to download your app, you can pay influencers to talk about it, but to get a normal person who isn't looking for startups every day to recognize a new product and then go use it and then tell someone else about it because it's that valuable or interesting to them. That's kind of the ultimate to me, like the peak of a great consumer product. I do think we still see like TikTok as an organic channel is still very powerful. It's probably harder to build an audience on TikTok, especially as a startup than it was a year and a half ago or two years ago. And it'll get harder and harder over time. These are starting to use TikTok ads, which is also interesting. Again, like low cost for now, great channel for now, similar to how Instagram and Facebook ads got so much more expensive. Kind of the arbitrage and opportunity of these new platforms tends to go away over time. ([Time 0:14:30](https://share.snipd.com/snip/28e20ab5-6c28-4da2-8d24-f008eeb5dc82)) - How to Hit Number One on the App Store Key takeaways: • It is difficult to become the number one app in the App Store. • There are a variety of factors that contribute to this difficulty. • Some apps that did not become the number one app in the App Store in 2018 continued to see success in 2022. Transcript: Speaker 1 A lot of downloads and illustrates just the pure difficulty of getting to number one because her TikTok had more than 20 million views. And then she made several follow up videos that also had hundreds of thousands, if not millions of views. So if that can't even hit, you know, number one for the day, then it kind of just puts into context how much of a challenge it can be. Speaker 2 Totally. So you mentioned Ben the dog. There have been some other apps, which as you said, did not hit number one, but still really hit some traction. And I want to talk about the different categories outside of social that saw some movement in 2022. So what were some of those categories that we saw outside of social? Yeah. Speaker 1 There were two or three kind of themes that to me dominated the apps at the top this year. And two of them were actually what I see as tech shifts or tech progress that enabled new consumer behavior. So one big example of that is widgets. We saw a couple of widget apps at the top at some point, mostly in summer 2022. And these kind of exploded after Apple made a change to iOS 16 that allowed users to put widgets on their home screen of their phone and also on their lock screen of their phone. ([Time 0:17:22](https://share.snipd.com/snip/730a24ab-e64e-4e83-8050-3a7f1332b6dd)) - The Top 10 Apps of 2022 Key takeaways: • There were two or three main themes that dominated the apps at the top this year. • One of them was a shift in technology that allowed for new consumer behavior, specifically the use of widgets and AI. Transcript: Speaker 1 There were two or three kind of themes that to me dominated the apps at the top this year. And two of them were actually what I see as tech shifts or tech progress that enabled new consumer behavior. So one big example of that is widgets. We saw a couple of widget apps at the top at some point, mostly in summer 2022. And these kind of exploded after Apple made a change to iOS 16 that allowed users to put widgets on their home screen of their phone and also on their lock screen of their phone. So you didn't even have to unlock the phone and you could see what popped up on a widget. So then there was a group of new companies, noted, for example, as one where you could send little notes to your significant other or little drawings. Locket widget was probably the first one to explode in January and then was followed by live in, widgetable, a bunch of other apps that really capitalized on this kind of not a sole platform Shift, but kind of a maybe an operating shift, a system shift by Apple that allowed for this. Another big tech shift that became a trend in top apps was AI, of course, and that came mostly in the fall when models like stable diffusion became available ([Time 0:18:04](https://share.snipd.com/snip/69f6a152-d764-4e50-ba95-f64222d990fc)) - The Future of App Monetization Key takeaways: • Gaming companies have paved the way for inapp purchases and subscriptions to be the main ways that they monetize their apps. • Subscriptions are becoming more common, and app developers are starting to be more aggressive in their pricing. Transcript: Speaker 1 It's a very good question. And I actually feel that kind of gaming companies, both apps and just traditional games, have kind of paved the way here. In gaming, they have kind of this concept of the whales, which is that the vast majority of your user base is probably going to be free users or generate very minimal revenue. But then you'll have some people who spend hundreds, if not thousands of dollars every month on your app. And it really adds up over the course of a year. And so the goal is to kind of acquire free users as much as possible and then convert the ones you can into that whale type behavior. I still think we've yet to see an app hit number one that charges for a download. For some reason, that kind of cognitive shift of like, I can't even see what it does or how it works before I pay. It still seems to be like a barrier for most consumers. What we're seeing most apps do is in-app purchases similar to games. And that's something like what Lenza did, where you get to the moment where you can deliver a lot of value and they'll pay for that specific item or that specific deliverable. Subscriptions are maybe the more classic for consumer apps of how they monetize. I wrote about this the other day, but we had this first wave of consumer subscription apps that were all charging $60 a year. Think about the cons of the world, the head spaces, all the fitness apps. Many of those are amazing companies, but it's hard to generate hundreds of millions of dollars of revenue on things like those. So we're seeing subscription app developers start to be a little more aggressive in their pricing, whether that's charge everyone more if they're willing to convert to paid or have Different tiers of pricing. ([Time 0:26:49](https://share.snipd.com/snip/9d412b54-9da1-4861-8767-44dde6f1dd83))