Aurelie Guerrieri, founder of Akila One, discusses the new mobile-only paradigm and how you can learn from innovators in China and elsewhere with Bertrand Schmitt, CEO, Co-Founder & Chairman of App Annie.
AURELIE: My name is Aurelie Guerrieri and the founder of Akila One, a Growth Consultancy helping mobile startups scale. I’m the author of The Mobile Native’s Guide to Marketing, published by App Annie, and the creator of the podcast series, Growth Hacking is Dead, Long Live Growth Marketing. Today, as part of this series, I speak with Bertrand Schmitt, CEO, Co-Founder and Chairman of App Annie. Bertrand, thank you for being here.
BERTRAND: Great to be with you Aurelie.
AURELIE: In a few words, can you tell us how you got your start in the app world, and embarked on the journey to build a leading mobile analytics company?
BERTRAND: Actually, it was not a short journey; it took me many years. I started doing mobile around 1994, so in twenty-five years I’ve seen everything, from the first programmable calculators to PDAs, to the rise of the internet and all different types of smart phones. It took me a while but the benefit is that it put me in a good position. I’ve been around mobile for a long time and have seen the limits of different models, from traditional application downloads to the mobile web.
But I immediately saw the value of a new paradigm shift, with the Apple launch of the App Store in 2008, as well as the presence of powerful platforms like IOS and soon after, Android. So seeing all of this got me really excited. It was a new opportunity for a new approach to data and how to measure things in that brand new app world. I also had a clear belief that this would get bigger and bigger over time, because ultimately everyone wants a powerful computing device in their pocket. They might not express it that way, but that’s what they are looking for, an easy way to connect to the world, to use a service. That’s basically what people got with their smart phones and apps, giving us a great opportunity to develop our business.
AURELIE: You started App Annie in China, and today you measure the size of each geography. I really want to explore that particular market with you, because I think you could provide our audience with amazing tips on how to conquer that huge market. China is obviously a hotbed of mobile innovation; and in that sense, when you started App Annie, you were very forward thinking to start it up from there. Today, major western outlets are trying to emulate some of the unique successes of China. For example, some of Facebook’s Messenger’s recent product releases have been attempts to replicate some of the WeChat key platform features. What are some Chinese specific products or features that you’re excited about, and that you see a global potential for?
BERTRAND: China, but also other markets in Asia have developed unique offerings. Think about Japan with Line, or Korea with Kakao. China has been a hotbed for innovation, but also had this massive scale. We are talking about hundreds of millions of users of mobile internet in China; apps are about 700 million. So not only do we have some very uniquely designed products like WeChat in China, but also a massive scale that’s not found easily.
A few things we see from services in China, like for instance from WeChat, is the use of QR code. I think it’s pretty impressive how much more it is used than in some other markets. We see that changing: iOS11 is getting more native QR code integration, Facebook as well, so a few things are being translated right now.
Another thing in the China market, and probably true in India as well, is that one could argue that mobile and apps are even more successful there because people didn’t have easy access to a PC or laptop. It would be a shared laptop, or it would not even be readily accessible. So people moved from no online connection to always-on mobile connection, and were ready to basically change habits pretty quickly. They were willing to do that because it was such a gap.
Take Facebook; it was initially designed on the web, and it had to commit to really transform itself for mobile and optimize itself. So China really benefited from some of these trends. It’s a huge user base, and also a base that was ready to make a big leap forward. It was not always the case with some other platforms.
But, at the same time I don’t think all innovation is coming from China and WeChat. If you take a look at Snapchat they are definitely launching new use cases, new scenarios, new features before some other markets so I think we can see innovation in many different places as well.
AURELIE: Absolutely, Snapchat is definitely the counter example there. I want to go back to something you said, that QR codes are back, and mobile first by design changes the paradigm. These forces at play are very different in the east than in the west; how can a developer change their view of the world, change their mindset in order to understand and capture this? Because with App Annie you’re showing that China is a huge revenue opportunity, so if I’m a developer here I’m trying to understand a world that is very different from what I’m seeing today. If you were to pull people off the street and ask them about QR code, they would probably tell you that it died years ago, but that’s not the case now or in the future. So, how can a US-based developer capture that huge opportunity?
BERTRAND: To capture that huge opportunity is a tough one, because the reality is, in China, there’s a lot of extremely successful local Chinese companies. They are going global, and there’s also a few global companies, like Amazon for instance, who are trying to play in the Chinese market. There, you will see huge companies that are doing really good. I’m not sure it’s a mobile first market anymore, probably a mobile only market in China these days.
Take Alibaba: 80% of all their transactions are happening through their mobile app. So, what’s happening is you’re doing everything for your mobile app. You stop investing in anything else because there is less return, less benefit. You put an enormous amount of firepower in development and improvement of this app at every level.
Another piece is that UX expectations are really different from user expectations outside China. And that’s important to keep in mind. It was already true on the web; if you go to a website in China, in Japan, or in the US, you’ll see massive differences between western style of design and eastern style. This is something that is done as well in apps; the twist is that probably many Chinese companies have better apps than their western counterparts, at least it was the case initially, because its user base shifted massively and quickly to mobile. Just a few years ago some of the most massive global and internet companies were not yet fully into apps and not putting enough resources to really get to the level of user experience. I guess the gap has been bridged at this stage, but there are still really different styles of UX.
But it’s not just about UX. Think about online delivery in China – people’s expectations are already set that some of this should happen within a few hours, same-day type of deliveries. The whole ecosystem, whatever you might expect, or what you think is normal in this or that market, might be very different in China. It’s possible because you have a lower cost of labor, a very aggressive level of competition, and you have an ability to play and risk a very different business model very quickly. So, that’s also some of what western companies, or Japanese or Korean companies, have to think about before they go into the China market. Expectations are really set up in a different way at every level of the value chain that users are experiencing.
AURELIE: You bring up a lot of very strong potential concerns for behemoths like Amazon and Snapchat when you’re talking about delivery, or when you’re talking about UX. It’s true that some western companies have had some pretty costly and public failures in China. I think of Uber, who invested billions of dollars there only to retreat later. Based on your understanding of the market, what are some pitfalls to avoid, and what are some ways to successfully engineer your Chinese market entry if you’re the lucky growth marketer at one of these big companies?
BERTRAND: First, I would not call Uber a failure too quickly, because they are ended up with a massive stake in a very successful player, Didi. Going back in time, thinking of other failures in China, not everyone ended up with a massive stake in a giant potential success. A similar story would be Yahoo, who ended up with a real big stake in Alibaba, but others like Ebay came without much to show in terms of their investment in the Chinese market. Let’s wait and see how much Uber’s stake in Didi goes before taking judgment; perhaps there will be a good surprise from that.
To go back to your question about what are the pitfalls for western companies in China: in terms of pitfalls, we talked about UX, and the difference of expectations. Also, the rate of innovation in China is very intense. What takes you months to decide, to validate, to strategize in other markets, may take only weeks to happen in China because people are used to innovating very fast. The agile development cycle is taken to a whole other level, and that’s something that companies are usually not organized for. Another piece is that if you run everything related to China from the US, with a lot of decision-making involving US headquarters, that’s probably going to slow you down way too much. And it will start to piss off your local Chinese team, because they will have other options in front of them and will be frustrated by the lack of power they have while looking at competitors. The rate of innovation and the level of autonomy you want to give to the local teams might be very different from what you are used to, so if you’re not ready to make an exception of China that will be difficult.
Another piece is the level of investment; you talk about Uber, and the level of investment Uber decided to put in place to get some success in China was absolutely massive. If you’re not ready to go to that level of massive investment, (and you have to do that because the market is huge and your competitors are going to go after massive investment), you really have to be ready to know that taking a stake might significantly represent a large chunk of your overall fundraising needs. You cannot underestimate how much you’ll have to put online to invest. There is a lot of money in China generating a lot of competition and bigger and bigger investment over time. So you have to be realistic there.
AURELIE: I think that ties back to your comment around scale earlier; competition is fierce but the payoff is really huge. I remember one of my investor friends telling me that in China, if an app gets a million users, that’s basically friends and family. So the scale at which you evaluate success requires quite a bit of investment.
AURELIE: That’s very interesting. I actually wanted to ask you about India, because China is maturing and has some of those higher-end handsets. But in India, it’s a huge market growing extremely fast which doesn’t have some of those characteristics. Do you think that India is the next new frontier, where gold miners need to go and set up shop to reap the early benefits of the gold rush there, and how would you approach that market?
BERTRAND: This is not an easy one. Take China: a lot of foreign companies for instance started early but it didn’t give them a lot of benefits down the line when the local players started to invest massively. You could argue India is different; you don’t have a lot of local internet players that can invest massively in the app space, so there are probably more opportunities for foreign companies. Another interesting fact is that Chinese companies are very successful selling phones in India; you have Samsung, with local Indian manufacturers. But Chinese manufacturers also found some pretty good sweet spots not just at the low end but at the mid end of the market. And the mid end of the market in India has been one of the fastest growing segments. Another piece about India: it’s got a big volume, a lot of people, but it’s not as many people as China in terms of good income. The middle class in India is probably way smaller than it is in China. Something to keep in mind; overall population size is similar, with less spending capacity right now. What we see in India for instance is huge downloads; but from the other end, there’s very low monetization of these downloads. So that’s really a big question. In India, low end devices are too expensive, as is access to 3G, 4G networks, so it makes delivering services more challenging. People will side-load your apps, they will not connect to the network on Wi-Fi, maybe once in a while when they have access to it, so it’s a very different structure.
Some companies are taking a different approach to India market. Like creating a more low-end version of their app or their service – Facebook lite, Google has also had a similar different approach where it’s new version for India market, Android Go. They’re all trying to adjust to what is really possible in that market, but this is also the market with the highest uninstall rate in the world because the memory size of the device is pretty small. Lots of challenges in the Indian market, while at the same time the monetization paths are not clear.
I will say one more piece, for China and overall east Asia, is there has been a lot of gaming monetization for the past 15 years. It’s on console in Japan, and in premium modem in Japan and Korea and China, and this has translated well to mobile. That’s not an existing phenomenon in India. So in terms of monetization opportunity, it’s not just the translation of spend from one type of gaming to a new one, you will have to create – I don’t want to create addiction, but – create more interesting gaming from scratch. And that might take way more time before you get to bigger levels.
AURELIE: Very interesting points to consider as one might consider India as a target market. Although it might sound attractive because of the common language, it’s definitely a very challenging one. So this series is around growth marketing and how growth marketing is not about hacks. If you had a magic wand and could change one thing in growth marketing, what would that be?
BERTRAND: You want to be strategic before being tactical. And you have to do both. I see too many marketers who focus on the tactics. I think you need to start with a clear understanding of your market, your opportunities, understanding your environment, of the capacity to earn market size, and the channels that are opening in front of you. You really need to think strategically first, and think about user experience. I always go back to user experience. It’s a key thing to keep in mind and to be successful in the long run. Don’t ruin the user experience because of user acquisition activity for instance, that would be another piece of advice.
AURELIE: I know a tool that can help you with being strategic, and a book that can also help with that. Thank you so much Bertrand, it was a fascinating conversation. Thank you for being on the podcast!
BERTRAND: My pleasure, thank you so much Aurelie.