Build an MVP Right: What Does the Platform Economy Driven by Facebook, Airbnb, and Uber Teach Us?

There are currently 2.57 million apps on Google Play and 1.84 million apps on the App Store according to Statista. This variety has indulged consumers and made them picky. Statista also says that 25 percent of apps are abandoned after just one use. Let's see...

Why most new apps fail

Each app success story is unique, and so is each failure. But there are some common mistakes startups make again and again. We’ve compiled a list of the most typical causes of app failure.

Lack of demand. CB Insights discovered the number one reason for a startup’s collapse is lack of demand. You might think your app idea is brilliant, just as the creators of the Taxi Hold’em app did. Taxi Hold’em was proclaimed as the most innovative taxi app before Uber and Lyft. But the idea of turning one’s iPhone into a whistling taxi sign to flag down a cab wasn’t embraced by taxi riders. As a result, the app shut down and was added to the list of the most awkward apps of all times.

Lack of thorough preliminary research. It’s a common mistake to not study an app’s target audience, collect user feedback, and research the peculiarities of the market. Hailo was an Uber-like taxi app based in the UK. In 2013, it stormed New York City with over $100 million in investment. But it broke in 2014. One of the reasons for its failure was ignorance of the Big Apple reality. Most NYC taxi drivers at the time, unlike those in London, didn’t carry smartphones. And unlike London’s complicated routes, NYC routes are simple, so drivers don’t need a smartphone to navigate the city. A lack of available cars led Hailo to bankruptcy.  

Inability to meet the competition. Want to beat a popular competitor with your inimitable product? Think twice! Google Wave was an attempt by Google to create a social network capable of competing with Facebook. But Google Wave ended up being cooked and eaten by its rivals. One reason for this failure is that Wave combined services already provided by other platforms. However, Wave’s services weren’t as polished as those on the various platforms it copied. 

Poor user experience and security issues. Apps that don’t provide a great user experience always leave a sour taste in the user’s mouth. Security issues make an app even less palatable. Auctionata was an ambitious project that aimed to attract internet users to art auctions by providing online bidding. But the first online auction attempts failed to meet the promised level of quality due to slow broadband speeds, insufficient customer service, payment processing issues, and delivery concerns. As a result, the digital auction service faced serious financial challenges and shut down. In an entirely different category, the initially successful anonymous Yik Yak network faced issues with cyberbullying. A solution was never found, which made lots of people leave the app, which consequently shut down. 

Lack of promotion. Not creating buzz around an app usually leads to extra efforts later and losing the chance to carve out a market niche. That’s what happened to Everpix, a great mobile photo service that helped users access their entire photo collection and easily upload iPhone photos. The app shut down a year after launch as it didn’t promote itself. The Everpix creators knew their product was incredible and relied on it to promote itself. However, app stores are extremely competitive, and even the best apps require promotion.

Not creating an MVP. Building a minimum viable product (MVP) helps businesses put their ideas to the test. Creating a final product straightaway is like building a castle on the ice — you never know what crack will cause the disaster. 

Building an MVP the right way will help you save money and understand if your app idea is viable.

major reasons for apps failure

Read also: How to Make a Successful App

What is an MVP and what does it do?

The common understanding is that developing an MVP means creating an app with a minimum set of features and waiting for users to get back to you with their feedback. If this feedback is promising, you start working on the actual product. One of the main reasons to build an MVP is that the cost to develop an MVP isn’t high, and thus the stakes are low.

But guess what? An MVP might also fail, as it’s possible that there’s something wrong with the whole idea behind the product. 

How not to make your MVP a rocket that will never take off 

Here are some common MVP mistakes to avoid.

1. Unclear business model

One of the most common MVP mistakes startups make is having an unclear business model. A lot of entrepreneurs prefer to focus on implementing the latest technologies before worrying about basic business considerations. They assume they can think of business benefits later, once there are enough users to monetize. But this strategy is likely to fail.

2. Features, not interactions

This mistake stems from the previous. Often, while developing an MVP, startups count the number of features, prioritize them, define a killer feature (whatever this may mean), and end up creating a cool app that nobody uses. Instead of pumping your app with great features, focus on enabling interactions among users. Not providing users with tools to form groups around shared interests was the main reason MySpace was overrun by Facebook. Facebook offered a much better platform and tools to users, while MySpace failed to provide the social element of social networking.

3. Spending too much money

According to CB Insights, 29 percent of startups fail because they run out of money. Remember Everpix? They failed to distribute their budget properly. The creators wanted to build a fully working app all at once. However, good software doesn’t come cheap. Verge, after conducting a bankruptcy analysis of Everpix, stated that the company spent almost all of its $1.8 million in funding on the development process.    

You can avoid all of these mistakes if you take a thoughtful approach to MVP design.

Read also: How to Build a Strong Community: The Secret of Dribbble’s Success

How to build a Minimum Viable Product the right way

Today, a lot of startup MVPs are designed using Uber, Airbnb, Facebook, and other successful platforms as role models. 

The goal of a platform is to enable repeated interactions among users. And to enable those interactions, a platform needs to make it possible for users to exchange value with each other.

The way value is created on a platform differs from the way value is created by other types of businesses. On a platform, users – not businesses – are the main value creators. This is one of the core principles of platforms.

If you want to develop a product that uses a platform business model like Uber or Airbnb, here’s a methodology for creating a successful MVP.

1. Conduct market research and describe your idea

Before you dive into MVP app development, make sure your MVP will satisfy your target audience’s needs. Conducting surveys will help you understand your target users’ expectations. Pay attention to what your rivals are offering and think of how your app will stand out.

Answering the following questions will help you define your idea:

questions to ask yourself to define your app idea

2. Identify the core value unit

Define a core value unit for your platform. Every product should provide value for its users. Airbnb’s core value, for example, is providing accommodation listings; Facebook offers a news feed, and Uber provides a map showing nearby taxis.

This core value is created on the platform, and the platform can’t function without it. The core value creates the demand that makes the platform viable.

Understanding your product’s core value will help you build its architecture. And once you figure out the core value, you can start thinking about interactions built around it.

3. Build core interactions around the core value unit

Determine how to enable interactions among users so they can exchange value. If you were building Facebook, for example, you would be concerned with how to create a constant flow of content between a user’s feed and their friends’ feeds. If you were developing Etsy, you would be thinking about how to get creative people to sell their handmade products.

Each successful platform enables repeated interactions among users. Therefore, you need to pay special attention to how you design these interactions.

A core interaction consists of four processes: 

4 elements of core interaction on a platform

For Instagram, value creation looks like this: users register, enter personal information, take (or upload) photos, edit them, and post them. Likes and comments by other users signal the quality of those photos. To customize the user experience, Instagram sorts posts based on likes and comments. Value consumption happens when users look through their Instagram feeds. We discuss this process in detail in our step-by-step guide on how to build an app like TaskRabbit.

To assess the viability of your MVP, you need users. So how can you attract them?

4. Solve the chicken-and-egg problem

There are many known ways to attract users to an application: advertising, app store optimization (ASO), and others. But who will come to the platform first: producers or consumers? Here we have a dilemma. On the one hand, producers don’t have a reason to create value unless there are consumers. Conversely, if consumers come first, they’ll have nothing to consume.

Therefore, you need to think over your solution to the chicken-and-egg problem before you start developing your MVP.

Sangeet Paul Choudary, in his book Platform Scale, provides a recommendation to begin by attracting users who are more difficult to attract. For example, for content platforms such as Vimeo, it’s more difficult to attract video creators than video watchers. To attract content creators, Vimeo offers video hosting, streaming, and monetization opportunities for indie filmmakers.

Read also: Best Frameworks, Libraries, and SDKs That Can Help Develop Android Apps

What’s next?

Start collecting user feedback right after the launch. Based on that feedback, improve your product, test it, assess its quality, then test again. Repeat this process until the product is finalized.

 mvp improvement circle

In which direction should you develop and scale? 

Keep in mind that building a platform is a bit different from building other types of businesses. Platforms don’t scale as a simple result of greater investment, more employees, and more products. So what’s the solution?

After you’ve enabled your core interactions, you need to consider adding new edge interactions. These edge interactions will help you expand your platform’s capabilities and improve the quality of interactions between producers and consumers.

Airbnb, which appeared in 2008, initially launched as a website. This website MVP helped Airbnb’s creators evaluate the viability of the idea and determine which features were essential. It was only in 2012 that Airbnb launched their Android app. And only after launching the app did they begin to add features (edge interactions) such as Guidebook (which shows the nearest places to visit) and Translate (which translates accommodation descriptions into a user’s native language).

Facebook was launched as an MVP with just one idea in mind: to connect students within one university. The initial app was created on the basic MVP model, providing only features needed to connect users. Facebook was initially available only to students at Harvard University who tested it and provided feedback. By analyzing this feedback, making improvements, and adding edge interactions, Facebook’s creators were able to eventually offer the now extremely popular social media platform.

We hope this post has given you a knowledge base enough to get ready for riding the successful minimum viable product development rails. And remember: You can see from the examples above that you don’t need a fully developed app to check the viability of your platform idea. All you need to create is an easy-to-use MPV that shows if there’s demand for your app.

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