Taking a new project to market always involves risks.
Nearly 90 percent of tech startups fail. There are many reasons why mobile startups fail: sometimes they fail because there is little demand for their product; sometimes they fail because the competition is too tough. Here are the three most common reasons why mobile startups fail:
- They target the wrong audience
- They underestimate the competition
- They ignore the importance of marketing
It’s impossible to predict whether a particular product will succeed or fail. What we can offer is a list of strict “don’ts” that every mobile app owner should be aware of before they launch a product.
Here are four ways to definitely fail your startup:
Develop a product that you personally like without conducting proper market research.
Many of us are tempted to dive into developing a product before we’ve taken the opportunity to answer one very important question: does our product solve a real problem? Investing in app development when the app itself might not have market/product fit is one of the most certain ways to go bankrupt. To learn more, read my article about product/market fit for app development.
An illustrative example of a product that didn’t solve an actual problem is Dinnr, a failed same-day ingredient delivery service in the United Kingdom. Dinnr founder Michal Bohanes did some initial research — conducting one-on-one interviews — and found that 70 percent of his interviewees said they would use Dinnr’s delivery service. But in retrospect, Michal acknowledged that this interview-based research hadn’t reflected the real state of the market.
Speaking about lessons he learned from his failed product, Michal says he knows what went wrong: instead of asking people about their challenges with grocery shopping or getting take-out from a restaurant, he pitched his product. When you pitch a product, people subconsciously try to compliment you — and no one can honestly predict their future behaviour. Pitching your product in place of conducting solid market research will give you great statistics on paper and disappointing user acquisition in the real world.
Lesson to learn:
Before you start working on your project, consider how you can solve a specific problem experienced by a specific group of people. For example, Dinnr failed because they were targeting a social group that had no real problems with the existing infrastructure (Dinnr’s target audience was young educated professionals and single people in large cities). If they had targeted a different audience with more specific needs (for example, young mothers who can’t easily go grocery shopping, or senior citizens who can’t drive to the mall), their startup would have had a better chance of survival.
Develop a product that competes with market leaders for the same sector of the market.
When there are several startups that offer similar or identical products, their survival depends on getting a bigger share of the market. After some period of time, users become loyal to a particular service and are reluctant to switch to any alternative. Very often this means that the product that gets the biggest share of the market initially will ultimately push others out of the market altogether. Experience shows that even in a sizeable market like the US there’s only enough space for a few big players. If you want to stay afloat you have to fight tooth and nail during your initial expansion.
Sidecar was launched as an on-demand car service. They had a well-thought-out business model and were highly innovative. All the same, Sidecar failed. Sidecar launched right when the on-demand delivery services and taxi services were getting big, and consequently they had to compete with Lyft and Uber.
[Defunct Sidecar. Source: BostonMagazine]
By the end of 2015, Sidecar had fallen too far behind Lyft and Uber and went out of business as a taxi service. Sidecar CEO Sunil Paul explains how Sidecar was pushed out of the market even though Sidecar pioneered many aspects of ridesharing services. They were actually the first shared rides, upfront pricing and other features that were later adopted by Lyft and Uber.
Sidecar serves as an example of how even an innovative product may not be able to successfully compete long-term with the bigger players. Having more money, Uber and Lyft had more opportunities to implement more complex features and to implement them faster and better. Eventually Sidecar just couldn’t keep up.
Lesson to learn:
If you end up in a position where you have to compete with market leaders for a relatively narrow segment of the market, it’s important to understand whether your product can survive the tough competition. Sometimes it is wiser to shift your focus to a less populated area of the market at the initial stages of product development.
Develop a product that breaks the law or lets users get away with illegal activities.
It’s not unprecedented for business owners to come up with a seemingly genius idea that later costs them a fortune in legal fees and fines. Exact offences vary from state to state, but in the case of mobile apps the most common legal issues involve copyright infringement or online harassment.
A year ago, in April 2015, Grooveshark, which started as a promising music-sharing service, announced that they were going out of business. Grooveshark was forced to settle with several major recording companies in the United States, and promised to stop their activities and wipe their servers clean to avoid further complaints from musicians and copyright owners.
Grooveshark's co-founders were inspired by YouTube and hit the market when the time was right. At the beginning of the startup journey Grooveshark was as successful as Spotify. But Grooveshark's business model existed within the grey segment of the market, and it had a significant flaw: it could only survive as long as people didn’t care too much about piracy and copyright laws — i.e. in the early days of streaming web services.
Eventually the legal grey areas caught up with Grooveshark. Even signing a contract with EMI in 2009 in abid to go legit didn’t work out. They still ended up getting sued by EMI when EMI claimed that Grooveshark failed to provide an accurate accounting of all the songs they streamed. Alongside these legal issues, the market was changing: users were now willing to pay for the music they were streaming. Spotify was gaining more and more users, and Grooveshark's days were over.
[Defunct Grooveshark. Source: Griffinmullins]
Another example of a mobile service that failed after struggling with legal (and moral!) concerns is Secret. Secret, an anonymous social network and one of the most popular apps of 2014, shut down even though they managed to secure $35 million in funding during their last year. What went wrong?
The app initially let users publish anonymous posts to be shared with their phone contacts and Facebook friends. It became popular among people in Silicon Valley and was widely used for spreading rumours within the tech community.
Secret failed because of the nature of the app itself: anonymity is great for attracting people who want to gossip, but it also incentivizes certain types of behaviour like cyberbullying. Secret was severely criticised for not moderating their content and for providing perfect opportunities for online harassment. This posed a challenge, because Secret couldn’t exist without anonymity and complete freedom. As soon as they introduced new rules prohibiting certain types of posts (for example, posts with real people's names in them), users started leaving the app.
If you build your product around the idea of uncensored content and full anonymity, you can’t just back away without losing your users.
On top of the shaky moral grounds, Secret broke another important rule of product development: you can’t rebrand your product into something completely different and continue targeting the same audience.
Lesson to learn:
When you come up with a business idea, make sure there is a fully legitimate way to implement it. Don’t break the law. You should investigate legal matters and avoid product ideas that might make you liable for harassment or piracy. Be wary of apps that allow users to share sensitive information, download or stream music and videos, share images, etc. Additionally, it’s important to consider what moral concerns your app might raise (think Secret). Even if your product doesn’t break the law, it may still become a pariah.
Develop a great product and think that it will market itself.
Investing everything you have into development instead and failing to come up with a solid marketing strategy is one of the most disappointing ways to fail your business venture. Concentrating too much on the development side and ignoring marketing and promotion spells failure. You can have the most innovative, user-friendly app of all time — but it won’t matter if your users can’t find it.
This is what happened to Everpix, one of the best solutions ever designed to manage a library of photos. Within their two years of operation, Everpix attracted more than 50 thousand users, but it never got enough traction to have sustainable growth and eventually went bust.
[Defunct Everpix. Source: Fontsinuse]
Everpix’s co-founders were focused on creating an ideal product, and so they invested heavily in development, spending $1.8 million to build the service. At the same time, they didn’t promote the service, and when they finally realized their mistake it was too late.The revenue was not enough to pay the bills, not to mention to develop a successful marketing strategy.
Everpix is an example of how a high-quality product can fail whereas less perfect apps can gain traction and eventually succeed.
Lesson to learn:
In mobile development success is about finding a balance between building a high-quality product and complementing it with an appropriate marketing campaign. One doesn’t work without the other. Don’t assume that your product will market itself, no matter how great your app is.