--:-- Host: I think the opportunity maybe has never been greater to build and monetize a mobile app quickly, make a few million dollars and retire if that's what you want to do. Welcome back to the a16z podcast and also welcome to what I think is one of our best episodes to date. Today, I talked to a16z consumer partner Olivia Moore about what I'm calling the state of the app store.
--:-- Host: So a few weeks ago, Apple released a stunning statistic. They said they've paid developers over $320 billion, yes, billion, since the launch of the App Store in 2008. And around the same time, I saw Olivia post a tweet where she had basically compiled a list of the top apps in the U.S. App Store throughout 2022. So in this episode, you'll not only get to hear what made it to the top, but also what they have in common. Hint, a lot of the big winners are in social, but perhaps a new wave of social apps.
--:-- Host: We also get the scoop on not just what it takes to hit number one, but to stay there. And we covered tons of examples, many of which I had never heard of. Things like a new age beanie baby app, a viral talking dog, an app from 2012 that finally hit the top 10, and a Chinese app that's been number one for a majority of this year. And that's not TikTok. There are endless learnings about how founders can take advantage of these opportunities, including Olivia and I's master plans to top the charts ourselves. So stick around to the end if you'd like to hear that. Let's get started.
--:-- Host: As a reminder, the content here is for informational purposes only. Should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any a16z fund. For more details, please see a16z.com slash disclosures.
--:-- Host: Olivia, welcome to the show. And I'd love to start out by hearing how you compiled this data in the first place.
--:-- Olivia Moore: Thank you. I'm excited to be here and talk more about this data. So I used an app data source called appfollow.io, and they publish a daily ranking chart where they show the top iOS apps every day based on the Apple App Store ranks. And so I went in for every day of 2022 and I recorded what the top app was for that day.
--:-- Olivia Moore: And then it took a while, but the end result ended up being pretty interesting because I was able to run a bunch of numbers and analysis on the apps that did crack that number one spot.
--:-- Host: Yeah. I mean, first kudos, let's all give listener claps for you actually going in every single day and pulling this data. But let's talk about the results. So what were the top apps of 2022? And let's just start with the top three and then we'll get into some of the ones that followed.
--:-- Olivia Moore: Yeah. So there were three big winners of 2022, which were Be Real, which is a new social media app. TikTok, of course, was number two. And then Gas App was number three. Gas App is an interesting story because it was actually released later in the year in the fall. So it kind of came from behind with less time to grab the number three spot for the year overall.
--:-- Host: Yeah. And I have to say that I'm not really very active on any of those three apps. So I feel super old hearing that they are the three topping the charts. But just to reiterate, so these are the three apps that hit number one the most throughout the year.
--:-- Olivia Moore: Yes, they spent the most number of days at the top in the number one spot on the U.S. App Store.
--:-- Host: Okay, so I feel like the natural question is, are we in a new age of social? Because all three of these happen to be social apps. And again, I'm feeling kind of old here, but during my era, we're thinking of Facebook, we're thinking of Twitter, Instagram, Snapchat, and none of these appeared in the top three. So what's your take there? Are we in a new age? Are we diverging from the past in terms of what people want in terms of social?
--:-- Olivia Moore: Yeah, it's a great question. And none of the kind of usual suspects, the Instagrams, the Snapchats, or the Facebooks appeared in the top at all, let alone the top three. The top five apps this year in terms of days at the top were actually all social media products. And three out of those five were apps that didn't even exist two years ago. That is definitely not always the case. I pulled the data for 2021 as well. And the top five for that year was a mix of some social media, but also fintech, more utility or business apps like Zoom, and then traditional media apps like HBO Max.
--:-- Olivia Moore: To me, the fact that Instagram and Snapchat didn't appear at the top doesn't necessarily mean they're dead as products. I think part of what it means is they've saturated the U.S. user base, so they aren't getting a ton of new downloads every day. But what I think it does tell us is that consumers in the U.S. right now and actually worldwide are excited to try something new when it comes to social products. And they're willing to download them in droves.
--:-- Host: Totally. I also want to think about how these social apps differ because I, for one, am also interested in trying things new. But it feels like the old generation of social apps were pretty similar. They're more of a feed-based social application. And it feels like, again, I'm not native to these three that made it to the top, but they do feel kind of fundamentally different in what they're providing to the user.
--:-- Olivia Moore: Yeah, I absolutely agree. I think we've seen this broader shift towards authenticity and towards more interactive experiences on social and away from maybe the traditional scrollable feed where everyone has this perfectly curated profile and maybe you post once a week or once a month. Three of the top five apps were new social media apps. TikTok is in its own world as already a giant company at this point. But Be Real is a front-back camera that only is live once a day for a limited period of time. So you have to be very honest about what you're actually doing. It shows both sides of the camera. Gas app, of course, is about giving anonymous compliments to friends, mostly aimed towards high schoolers. And then Live In also made the top five. And this is an app that lets you send random pictures directly to your friend's home screen widgets. Similar to Be Real, they're usually pretty candid shots.
--:-- Olivia Moore: I think those three in common for me are about having more delightful and consistent ways to interact with a smaller group of close friends versus maybe these large feed products where you're seeing tons of posts from influencers and brands and larger companies. And it's a very curated experience.
--:-- Host: Yeah, totally. And I also think about the fact that they're pushing back on the previous generation of social apps. It feels like in the generation that I grew up with, we were so heavily curated that the next generation is like, I don't like this. I don't like the fact that everyone looks like a supermodel on Instagram. Let's just be real, literally, and take pictures of us throughout the day.
--:-- Host: But I also think what you mentioned about the fact that a lot of these are new apps, like even Gas, you mentioned, just showed up in the second part of the year. How hard is it for these apps to stay on top? It also feels like we were in this heyday several years ago where something like a Facebook was top of the charts for a very long time. And there wasn't really this cyclical nature of a new app, a new app, a new app. And today it feels a little different. I don't know if it's just me, again, being in the prior generation, but I'm like, oh my god, I can't keep up. There's a new app every day. Is there really a different time element to staying on top?
--:-- Olivia Moore: Yeah, I absolutely agree with you. My data shows that there are a lot more new number ones every year and the pace of that is speeding up every year. Apple is a little bit secretive about what actually makes a number one. Most people think that the biggest factor is daily downloads. And then, of course, they add in maybe some filtering around whether people are actually opening the app and engaging with it. But my data polls show you need probably around or maybe a little bit above 100,000 downloads in the U.S. on iOS on any given day to hit number one.
--:-- Host: Okay, yeah, that's super high.
--:-- Olivia Moore: Very high. And so if you think about the path of a normal consumer discovering a brand new product, 100,000 people knowing about that is huge. But also, not everyone who hears about it or learns about it is actually going to download it and convert to a user. So you actually probably need millions of people to hear and learn about your product over just a couple of days to get to 100,000 downloads a day. And you're competing against some of the other number ones this year were like NBC's Peacock streaming service, Planet Fitness, DoorDash, HBO Max, these big companies that have tons of marketing resources.
--:-- Olivia Moore: My view is that TikTok, Instagram Reels, and these other short-form video platforms have created this very unique opportunity where you can go viral and have something be seen by 10 million people in a day and shoot to the top. But now every new startup is competing against all the other startups that are also trying TikTok. So it's still not easy at all.
--:-- Host: Is there also an element of it not being so hard to get to the top, but also staying at the top? I don't know if it's just me being older, but it feels like we have smaller attention spans. People are excited to move on to the next thing instead of sticking with the applications that they know and love. Is that just me interpreting the data or are we actually seeing something here where it's not only harder to reach the top, but it's also harder to stay at the top?
--:-- Olivia Moore: I completely agree. The largest number of apps that hit number one this year were number one for just a day or maybe half a day, not that long at all. And more than half of the apps at number one were up there for less than five days throughout the whole year, not even five consecutive days. What I've seen is if you have a TikTok viral hit, you can maybe get a lot of people to download it. But then it needs to be a very strong product with network effects that encourages people to share it via word of mouth and to keep using it every day beyond that initial, "Oh, I saw this cool video about this app and I'm going to download it." So my view is it's in some ways easier to break into the top than it was five years ago, but it's probably actually quite a bit harder to stay at the top unless you have a very magical and retentive product.
--:-- Host: Yeah. And how do you think about creating that product? Because I think about so many applications that are really exciting and play into this need for us to just have constantly new things on our screens. I mean, something that even comes to mind there is I've been seeing articles about how people are speeding up songs or we all are familiar with the TikTok split screen. It's like we actually need to pack more information into our content because we need to have that level of interest sparked with us. So how do you build that level of retention when it does feel like there is this interest of novelty, like give me something new all the time?
--:-- Olivia Moore: I think it's largely a couple of things. I think it's a product question of whether you've built something that delivers value day after day. And ideally, those are network effect products, which means the product gets better the more people are on it. Think about the early days of Instagram. As more of your friends came on Instagram, it was a better experience for you and a better experience for them because you were seeing a lot more posts from people that you know and care about.
--:-- Olivia Moore: I think the other interesting element that we're starting to see companies index or lean towards more is these hooks within the products or around the products to encourage people to both come back, but also to share or broadcast their behavior. So two of the top three this year, Be Real is one of them. And because the Be Real drops at the same time per day for everyone, it creates this moment in the real world where everyone is taking out their phones and being, whether it's in a classroom. I've had people do it in meetings.
--:-- Host: That's so funny.
--:-- Olivia Moore: You're in line for something. And that is a very powerful and unique word of mouth in real life moment where if you don't have the Be Real and you see everyone get the ding and pull out their phones, you're going to check it out. Gas app also has a very clever hook. They went in through high schools. Basically, the mechanism of the product is that you vote for which of your friends is the top under X, Y, Z, all very positive criteria. And so it creates this FOMO again in the halls of the high school where people are saying, "Oh, did you see who got this on Gas app?" or you're getting a notification of your friend voted for you for this. And it's very hard to resist that kind of pull when you're both hearing about it online and you're seeing the people around you in real life utilizing the product.
--:-- Host: Yeah, your point about Be Real made me think of an SNL skit where they were joking about Be Real popping up during a bank heist. Like, "Wait, just a second. I need to Be Real." And there is this behavioral element where, to your point, it feels like you need people to build these habits and not just internally, but to share them externally. So you can have those network effects and word of mouth growth.
--:-- Host: But on that point about growth, you mentioned 100,000 downloads in a day. That is huge. Any marketing budget probably can't hit that purely through paid growth. So there does need to be this viral element to it. What would you say about being able to do that effectively? Because I think about Gas App, for example, which was recently acquired. Prior to the acquisition, Nikita, the founder, went on the Today Show and had this big exclusive segment, which in the past would have been huge for an application or a company. And he said he thinks it generated a thousand downloads. So how do you effectively grow an app when a lot of the existing channels just don't really compare to this idea of word of mouth?
--:-- Olivia Moore: I see word of mouth as the purest form and maybe most lasting if you can get it right form of acquisition, just because the barrier that's probably hardest to overcome. 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 the ultimate to me, the peak of a great consumer product.
--:-- Olivia Moore: I do think we still see 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. Companies are starting to use TikTok ads, which is also interesting. Again, low cost for now, great channel for now, similar to how Instagram and Facebook ads got so much more expensive. The arbitrage and opportunity of these new platforms tends to go away over time.
--:-- Olivia Moore: What is interesting and always fun to see is sometimes there are these big acquisition moments that aren't at all orchestrated by the company, but orchestrated by the user base. And they're almost their own special form of word of mouth, but at massive scale. One of the top apps this year was called Talking Ben the Dog, which is a kid educational science game where you take care of this fluffy dog and you can ask him questions about science and do experiments with him. But it went viral after this YouTuber with 15 million subscribers, an adult YouTuber, started making videos of himself trying to debate really serious topics with Ben. And then, of course, it turned into a meme and everyone else made their own videos about it. And then the app suddenly hit number one again after being released years and years ago by an app studio who made it for a completely different use case than where it actually took off. I know the users have a mind of their own.
--:-- Host: The other story I like was shared by your sister, which was this boating app, right? There was a girl whose father had created this boating app. And then there's this clip of him at a conference where he's trying to get people to download the app. And quite frankly, it was really sad or it sparked that emotion. And it just said something like, "Hey, please help my dad's boating app" or something like that. A really, really short video, as you said, on TikTok, which seems to be a place where people are getting these viral hits. And I think it hit number seven or something in the app store, which maybe people are like, "Oh, number seven is not that high." But again, you said to hit number one, all of these are social apps, general mass marketed apps, and they require 100,000 downloads. So that's still a lot of downloads in a day.
--:-- Olivia Moore: A lot of downloads and it 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 number one for the day, then it kind of just puts into context how much of a challenge it can be.
--:-- Host: 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?
--:-- Olivia Moore: Yeah, there were two or three 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 enable 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 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.
--:-- Olivia Moore: So then there was a group of new companies. NoteIt, for example, is one where you could send little notes to your significant other or little drawings. Lockit Widget was probably the first one to explode in January and then was followed by LiveIn, Widgetable, a bunch of other apps that really capitalized on this kind of not a full platform shift, but maybe an operating shift, a system shift by Apple that allowed for this.
--:-- Olivia Moore: Another big tech shift that became a trend in top apps was AI, of course.
--:-- Olivia Moore: And that came mostly in the fall when models like Stable Diffusion became available to fully build into mobile apps and create experiences where you didn't have to have your own AI model as a developer, but you could still allow people to spin up beautiful art or avatars. So we saw those apps basically dominating the late Q3, early Q4 top charts.
--:-- Olivia Moore: And the last theme is actually not at all unique to 2022, in my opinion, but is kind of evergreen, which is anonymous social apps. We see these pop up pretty consistently every year. When I was a teenager, it was Honesty Box on Facebook and then Ask.fm and Formspring. Gas app was, of course, probably the best example of this for 2022. Nikita, the founder, just sold to Discord, and he actually developed a very similar app back in 2016, 2017, that he sold to Facebook that also hit number one for a while. So I think the big lesson there is the FOMO poll, especially for teenagers, of what are my friends saying about me is very, very hard to resist.
--:-- Host: It's so true and I can think of so many apps from when I was growing up that were really successful for a period of time and then you've seen iterations of them since. And to your point, Nikita literally just copied what worked before, what he sold to Facebook before, and then repurposed it, created Gas, and has now had another acquisition. So maybe this is a silly question, but is that worth doing? As in, if there's a founder out there or potential founder, should they just be combing through previous successful apps, like a Yik Yak, for example, and just creating the Yik Yak of 2023, because we've seen how effective they can be and how also kind of evergreen they are, because there are these innate human emotions like in Gas app to be complimented or Be Real to be understood? There are these fundamental human emotions that don't change across generations.
--:-- Olivia Moore: Absolutely. And there's a very consistent debate in the tech world of who's going to build the first anonymous social app that has true staying power and becomes a billion dollar company on its own. There's already in 2023, a new app that just raised a seed round that hit number one in Germany. It's called Slay, very similar to Gas app and TBH. So another example of that trend playing out.
--:-- Olivia Moore: I mean, and Nikita himself has said this, there's always going to be a question of these apps that are based around anonymous networks. Can you really build a lasting social network? Because people aren't really storing relationships on the app. They're not really communicating or direct messaging through the app. So they get very popular very, very fast. If there's no act two of the app, if there's no what's next, then they can also decline very, very fast as that core dense group of people that joined unravels a little bit more and moves on to the next thing. That's not to say that I don't think someone can build a large and lasting app in that space. So we're always on the lookout for that.
--:-- Host: Yeah. And I also wonder, we've talked already about this phenomenon where it seems like people are cycling through apps more quickly. And if that really is an underlying foundational trend, is there maybe an argument to say you don't need to last very long and really the goal is to create some sort of viral sensation, but also build monetization in from the get go? I mean, Gas, I feel like is a good example of this. I think Nikita has publicly said that they made millions of dollars in the several months where they were trending prior to the acquisition. And so ignore the acquisition. If a founder built a successful social app that trended even for a few months and made several million dollars, I would say that's a success. It's not a FANG level success where you go on to be a multi-billion dollar company. But would you say there's an argument to people focusing more on that given the state of the app store?
--:-- Olivia Moore: Oh, absolutely. I think it all comes down to what you as a founder are wanting to build. And I think the opportunity maybe has never been greater to build and monetize a mobile app quickly, make a few million dollars and retire if that's what you want to do. Clearly, Nikita is still building, so he's not at the retirement point yet. But I think one of his last tweets about the app before the acquisition said they had had 10 million downloads and 6 million in revenue, which is just amazing.
--:-- Olivia Moore: There used to be this paradigm in consumer where the goal was to build an app, get it to the mainstream, get it to Facebook level, Instagram level, millions, if not hundreds of millions of users. And then you would monetize people through ads, like the user becomes the product. And now I've been trying to pinpoint exactly what it is. I think it's a mix of Apple Pay and Google Pay adoption and saturation, people getting more comfortable making purchases online. Maybe it's the younger generation who is happy and feels safe buying something on their phone versus my parents' generation who is still suspicious of Venmo and thinks their money is going to get stolen every time.
--:-- Olivia Moore: But we are seeing many more apps get big and make money at the same time and at an early stage in their life. Lensa is another really good example of this, which was another number one from late 2022. They are an AI avatar company. And some of the external app data estimates say that they made upwards of $20 million in a couple weeks, getting people to buy a pack of avatars for $8.
--:-- Host: I certainly participated in that.
--:-- Olivia Moore: I did too.
--:-- Olivia Moore: It's hard to resist if you see everyone else posting them on Twitter and it seems like a fairly minor payment at the time. I think Lensa is an interesting one because you then want to say, what's the next act of the company? Is the goal to get people to give you money once and then they get all the value out of the product and leave? Lensa has been smart in that they're constantly releasing new styles, new packs, new avatars. They did dog avatars for the first time a few weeks ago, which I bought. So once you're on someone's phone and can send them notifications, there is a potential to continue to capitalize on that down the line.
--:-- Host: Yeah, I like your point about the younger generation being maybe more willing to spend money online because it reminds me of how not that long ago, people were really resistant to even spending 99 cents on an app. And I know there's a difference. Some of these apps are charging up front versus having in-app purchases versus monetizing in other ways. But it's kind of interesting how there was a period of time where people were just really resistant to paying for apps or things within apps, even if they brought much more value than, for example, $5 coffee. They were like, "No way. This is unfair. This should be free." And I think there is a shift there where people, maybe it's just the younger generation growing up with these apps and seeing that people are starting to pay for them. But it does seem like there's more willingness to spend.
--:-- Host: But I'm also curious to know across the different apps that you've explored, you mentioned Lensa as an example, are there any themes or learnings from the ways that people have decided to monetize? Is it better to charge up front for the app? Is it better to have these in-app purchases? And if you're doing in-app purchases, are there learnings or themes in terms of how people have been able to effectively get people to give their credit card?
--:-- Olivia Moore: It's a very good question. I actually feel that gaming companies, both apps and traditional games, have paved the way here. In gaming, there's this concept of "the whales" — 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. It really adds up over the course of a year. The goal is to acquire free users as much as possible and then convert the ones you can into that whale-type behavior.
--:-- Olivia Moore: I still think we've yet to see an app hit number one that charges for a download. For some reason, that cognitive shift of "I can't even see what it does or how it works before I pay" still seems to be a barrier for most consumers. What we're seeing most apps do is in-app purchases similar to games. That's something like what Lensa did, where you get to the moment you can deliver a lot of value and they'll pay for that specific item or deliverable.
--:-- Olivia Moore: Subscriptions are maybe the more classic way consumer apps monetize. I wrote about this the other day — we had this first wave of consumer subscription apps that were all charging $60 a year. Think about Calm, Headspace, 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 more aggressive in their pricing, whether that's charging everyone more if they're willing to convert to paid or having different tiers of pricing.
--:-- Olivia Moore: Tinder, for example, is supposedly testing a $500 a month tier. There's been a lot of skepticism about that. But from my perspective, it doesn't hurt the people paying less. If someone's willing to pay $500 and feel like Tinder is delivering that value with a more sophisticated product, I think they should go for it.
--:-- Host: I agree. It actually fits what we've seen in many other industries. Using apparel as an example, the messy middle is what typically doesn't do well. It's the really cheap options that resonate with one user base, and then the really expensive luxury items that do well for people who want that and want to signal in certain ways. That messy middle doesn't really serve anyone. I hear the skepticism, but I'm very interested to see how Tinder works because there's also the argument with dating apps that they don't have aligned incentives to actually match you — they want you on there forever.
--:-- Olivia Moore: Right. Yeah, that'll be fascinating. I think you can do it by charging the user directly, but we're also seeing subscription apps really evolve in who they're making money from. In some cases, subscription apps are going B2B or even developing new versions of the product sophisticated enough to get an insurer to pay for it. Calm just launched an actual clinical mental health offering catered towards people with anxiety and depression. They've partnered with insurers who will pay quite a bit more every year than the $60 annual program to have people on that. I feel we've entered a new era of subscription pricing, which is very exciting.
--:-- Host: That reminds me of an app I haven't seen — it might exist in the U.S. A friend of mine, years ago, had their insurance company give them this app. When they completed certain activities like a workout, they would get points. The calculus for the insurance company was that if they're doing these activities, they're likely going to be a net lower cost because they're living a healthy lifestyle. They would get Starbucks gift cards or things in return. I was like, man, I really want this. I do a lot of these activities and don't get rewarded. That's a great example of how the end user isn't paying anything — in fact, they're getting paid through rewards. But there's someone on the back end, the insurance provider, who is paying, probably a lot more than the 99 cents some apps charge.
--:-- Olivia Moore: That's a fascinating idea. I think we'll see more and more gamification of good behavior. As apps become more addictive — sitting on TikTok scrolling for hours — we're starting to see this rise of new focus apps where you grow a tree or a pet for every 10 minutes you spend off your phone. I've also seen similar apps where you get rewards or points for not being on your phone while driving. The phone can detect when you're in movement that feels like a car, and when you don't pick up the phone, it gives you points. This app was focused towards college campuses, so you could redeem them at a campus restaurant.
--:-- Olivia Moore: I love those types of ideas. That's a great example, similar to the widgets. When you pay attention to some of these software changes — like the ability to detect when a phone is moving, or in the widget example, that different UI — it's incredible. Some of the widget companies rose close to the top. One learning we already discussed is paying attention to apps of the past that had transient nature but linked to fundamental human desires. But this is another one: paying attention to the different technology changes Apple releases as potential layers you can integrate into a new application.
--:-- Host: Absolutely. The fact that there were so many widget apps and so many AI art apps that made it to number one shows that it's not necessarily the first to market that wins the space or gets all the value. Once consumers are aware of something new and exciting, there's an opportunity to optimize your keywords in the app store if they're searching for things like widgets, to run lower cost ads, to do TikTok videos. There's still lots of room to build compelling and engaging products beyond the first one that breaks open the market.
--:-- Host: Lensa is the perfect example. I'm aware of two or three different web-based applications — ProfilePicture.ai and Avatar.ai — that came out first with this idea of creating personalized avatars. I believe all of these products are based on the same APIs and infrastructure. They might have slightly different prompts, but the output was relatively the same. These web-based applications did relatively well — they had at least a several-week head start — but they were web-based. What was fascinating about Lensa was maybe the UX of having it on your phone, maybe a better name. The first few I mentioned did well, maybe made $100,000 or something, but nothing close to the network effects or virality of Lensa, which had millions of downloads and made millions of dollars in a very short span of time.
--:-- Olivia Moore: That's so true. To your point about analyzing what's behind consumer behavior and interest, for AI avatars, I tried many of the web-based platforms, which are fantastic. But it's a pain to airdrop or email yourself all the photos you want to use to train the model from your phone to your computer. Lensa being the first aggressive push on mobile for that was really smart. On mobile, you can enable notifications. Lensa can say, "Hey, we added this new style we think you might be interested in. Hey, we added avatars for dogs or avatars where you and your friend can be in it together." Their capitalization on mobile as a platform was really smart and vaulted them ahead of a lot of the web-based avatar products that came out first and have similar quality images but were just harder to use.
--:-- Host: That's such a great point, even just the push notifications. In the other cases, they added pets and different prompts that evolved the product. But every time they did that, you have to send out another email. There's a limitation to the number of emails you send out, and the conversion rate is going to be lower. That's such a great point about being mobile native and having access to a larger swath of people who are on mobile.
--:-- Host: Let's pivot a little bit. We talked about different categories that might be interesting or surprising. You mentioned one already, but I want to hear what other individual apps you thought were surprising that showed up in this list. We'll share this in the show notes. Talking Ben the Dog was one for me — I was like, what is this? Why is it on top of the app charts? Were there any others you were surprised to see?
--:-- Olivia Moore: I am always obsessed with App Store data because the stories it tells about what's happening in the real world are always really fascinating. Another one that surprised people this year was the 7-Eleven app for the convenience store chain. It almost always hits number one on Free Slurpee Day, July 11th, every year because you have to have the app to get the Slurpee. Two days later, we saw McDonald's hit number one on July 13th because it was Free French Fry Friday for the national French fry holiday.
--:-- Host: I was not notified of this holiday.
--:-- Olivia Moore: Exactly. So we're seeing these larger, more legacy companies get these fun one-off spikes when they combine their real-world events and activations with something in the app. I've also seen this play out with more serious real-world events. Starlink, the satellite internet provider, hit number one in September when they launched 52 new satellites into orbit. The news articles, the Twitter videos, everything around that monumental launch made people think, "I want to check this out."
--:-- Olivia Moore: Another big one was the NOAA climate app hitting number one during Hurricane Ian this fall. Another really interesting cultural moment app — there's a next-gen period tracking app for women that claims special encryptions making it harder to subpoena the data. That reached number one just a few days after the Roe v. Wade verdict was overturned in the U.S. Five, ten, fifteen, twenty years down the line, the stories that come out through this data that might not seem the most monumental are actually going to be really interesting and revealing about what happened in a given year.
--:-- Host: I love that you can almost see the moments of the year embedded within the charts. Let's look forward. We're now in 2023. We've got some great data from 2022, and I know you looked at 2021 as well. As we look forward, what should we be paying attention to? What kind of apps do you think are going to thrive in this new year?
--:-- Olivia Moore: There's already an early leader for 2023, which is Temu — a new commerce app developed by a large Chinese company called Pinduoduo. In China, the version of this app is a full group buying experience. You can say you're going to purchase a bag of apples, and the price on the app is $2. The more friends you invite to add a bag of apples to the order, the price can go all the way down to $0.10, $0.05. It gamifies commerce. The U.S. version is a little less sophisticated so far, but it's basically deep discounts on products largely shipping from overseas. There's quite a bit of gamification around inviting your friends to get extra points, which you can use to win free items or even withdraw cash from the app by inviting other friends to download it. Unsurprisingly, that has resulted in a ton of downloads.
--:-- Olivia Moore: Yes. For my most recent check, of the 25 days so far this year, Temu has been at the top for 22 of them. They weren't number one on New Year's Day because some habit tracker or New Year's resolution app hit it. But otherwise, they've held the top spot. That number of days would be good enough to break into the top five last year. I'm going to make an early call that we'll see Temu at least in the top five, if not higher.
--:-- Olivia Moore: Temu is an interesting example of another trend I expect to see in 2023: almost invisible AI products. We've seen these AI-first products, all the avatar and art apps. But TikTok was actually one of the first and still best examples of invisible AI — the reason the product is so addictive is because they have this algorithm that becomes catered to you. Temu does this really well too. They have this marketplace in the back end of inventory from thousands of suppliers. As soon as you browse the app for five or ten minutes, they can tell pretty quickly what you're clicking on, what you're interested in, and then they'll serve you deals and products really catered to your interests. I expect to see more companies utilizing that almost AI infrastructure play.
--:-- Host: That's a great point. We've seen the rise of TikTok as people shift from what some might call connection-based or contact-based interaction on social to interest-based, where it doesn't matter if you know the person. TikTok, because it's got such a strong AI back end, services the things it knows you're going to like and gets better over time. This fits into what we discussed before about how it's really hard to create stickiness with these apps over time. On one hand, it's nice to leverage word of mouth as people tell you something. But on the other hand, that word of mouth changes very quickly. If you have a strong back end where you can evolve and follow the user through their journey of liking something and then liking something else later, that's why TikTok has been so sticky. I've heard people who start on TikTok watching dancing videos, but then all of a sudden TikTok picks up that they like power washing videos or keto recipes, and it follows them through that journey. There's no need for them to go look for something else. I like that you mentioned these two applications that have AI in the back end. I also think there's a nature to that which is much more sticky than AI that's in your face, like Lensa.
--:-- Olivia Moore: This is a fascinating point because it brings up another trend I expect to see in 2023 that's very counterintuitive, and I think reverses a wave we saw in 2021 and 2022. The AI algorithm of TikTok is so good that it will get you enormous reach for your product very quickly. We've seen this trend with a lot of early stage consumer companies where a video will hit and go viral and suddenly have a million, five million, ten million views. They'll get a flood of users that the product isn't actually ready for and isn't equipped to retain. A few startups I talked to recently have started limiting their own virality, which sounds impossible because virality is theoretically organic. But what they'll do is if a video starts performing too well on TikTok and gets too many views, they will temporarily shut off the video or archive it because it's driving too many downloads and they feel they're not necessarily converting those downloads into engaged users well enough yet. I think we'll see the strategy around how founders utilize TikTok hopefully evolve quite a bit this coming year.
--:-- Host: It reminds me of something you've mentioned before — TikTok is so good that even users are limiting themselves from the app. I do this. I don't go on TikTok because I am very well aware that TikTok's algorithm is better than my self-control. I need to shut it down and not go on the application because I know I will inevitably find myself two hours later looking up and asking what happened.
--:-- Olivia Moore: On the couch scrolling.
--:-- Host: Are there examples of apps that leverage this pushback on how good some of these apps are at capturing our attention?
--:-- Olivia Moore: First of all, I think the trend is very real and probably underestimated right now. This is comparable to the moment for millennials where Selena Gomez was like, "I can't go on Instagram anymore" — the biggest, most followed star. We're seeing Emma Chamberlain, Jenna Ortega, all of these Gen Z stars saying, "I'm not going to do TikTok anymore because it's too addictive." A couple of things have come out of that. I think Instagram Reels and YouTube Shorts benefit from that. It's funny — I have a younger brother, he's 22. He told me, "I had to delete TikTok because it's too good. It's too addictive. I'm just going to watch Instagram Reels." I told him, "But you're giving data to Instagram Reels that allows them to make that algorithm better. Soon enough, there'll be no escape from these hyper-curated short form video algorithms."
--:-- Olivia Moore: On a higher level, maybe this ties back to what we were talking about with new consumer social. BeReal is a direct example of that pushback. On BeReal, you go in, you take a picture, you have to take it in a two-minute frame. Maybe you scroll through and leave an emoji on some of your friends' pictures, but you're not in the app for usually more than a few minutes a day. Users find that to be a more fulfilling or healthy way to engage with social media than ending up on a scrolling feed for hours.
--:-- Host: I'm trying to think of examples where there seems to be a healthy level of interaction between people. One example that comes to mind is Strava. The app isn't focused just on being social — "Hey, I'm going to comment on your post and post this image of my life" — but really fixated on an activity. In Strava's case, running or cycling. Social is added on to that, but the social app isn't fixated on just trying to be social. It's fixated on something else. Are there other examples where social is almost like a modifier instead of the core of the app itself?
--:-- Olivia Moore: It's a great question. There's this new wave of what we would call vertical social networks, where the network is focused on a specific interest and ideally uses real-world data and connections from that interest to build a product that becomes a system of record for you in that activity. Strava is a great example — the product works best when you're actually going on bike rides and tracking them in the app, accumulating trophies. Goodreads is another interesting early example where the core unit of engagement is tracking your progress through a book. Maybe you'll meet friends, join book clubs, interact in that way on the app. But it's not the same hyper-curated, influencer-first, perfect vision product.
--:-- Olivia Moore: Another very interesting one — this didn't hit number one this year, but I'm watching it — there's an app for tracking Squishmallows. I don't know if you're familiar with them. They're these new, very popular stuffed animals that people actually go diving through bins in Target to find rare ones they've never seen before. Mid or late November, an app specifically to track your Squishmallow collection broke into the top 200 on the App Store, which was incredible. The reviews were mostly from teenagers or younger kids, maybe some adults with Squishmallow collections, saying it was such a fun and rewarding way to express their interest, track their collection, and browse the collections of other users. "Oh, this person found this Squishmallow I've been searching for for years." I do see these more verticalized social platforms as a potential source of respite away from these broad-based networks that really suck you in.
--:-- Host: I'm so glad you mentioned that example, and I just outed myself as a Squishmallow fan. One of the themes we discussed keeps coming up: there are these trends from the past that reemerge. This theme of collecting Squishmallows and having rare ones is a classic in collectibles — it almost exactly parallels Beanie Babies. But it's fascinating to see how this digital element is coming into play because that didn't exist during that prior era. As a fun fact, if people Google it, there was once a lawsuit between a married couple because they couldn't decide who got the Beanie Babies.
--:-- Host: Let's move on to a question related to what we're discussing: the interplay between digital and physical. Something fascinating about Strava is it's not just me on my phone clicking on the app and interacting with people. I'm doing some sort of physical activity. But there's maybe a further extension of that — not just solo interacting physically, but how do these digital apps potentially impact the way we engage with other people physically? A cyclical nature to our digital and physical lives. Are there examples of apps where our online behavior actually penetrates the physical world or changes it?
--:-- Olivia Moore: Absolutely. The first wave of subscription products — Calm, Headspace, the fitness apps, the nutrition apps — were very much single-player mode in helping you optimize yourself and your life and your habits. We've definitely seen this rise of a new wave of apps focused around relationships. The app just needs you and one other person to work, but they'll prompt you with daily questions about the other person, things you want to talk about — ways to use this digital product to enhance this real-world relationship and make things easier or strengthen or improve these relationships.
--:-- Olivia Moore: The most basic version of this was the widget apps that went popular. Locket Widget — the founder, his name is Matt Moss. I think he's either a college student or a recent college graduate. He made it for his girlfriend. They were in a long-distance relationship and wanted to see what each other was up to every day. That use case is very strong: how can we integrate technology more seamlessly to help us have better in-person or in-real-life relationships? I love to see that and I'm excited to see more.
--:-- Olivia Moore: Another trend we're seeing quite a lot is apps and products — and especially platforms like TikTok — driving traffic and engagement towards real-world businesses. Gen Z — Yelp is not their favorite place to be. They've never really been big adopters of Yelp. They're looking for a new platform. Instagram is trying to build this. TikTok has emerged as an early home for this, where people are discovering restaurants, places to go, things to do around them from TikTok. Similar to how TikTok can drive a wave of people to your app, it can drive a wave of people physically to your storefront door.
--:-- Olivia Moore: There's a food reviewer named Keith Lee. I think he has a couple million subscribers at this point. His account took off in November on TikTok, and he only reviews food from small businesses that he either picks up or gets sent to him. There are so many stories out there now if you Google him — businesses that were really struggling, and he was able to generate tens of thousands of dollars in revenue for them in just one or two days through these food reviews that went viral and changed the game. The lesson is that apps or companies with apps should really be working with these creators and being on a platform like TikTok.
--:-- Host: The reason I ask is that in some sense, I feel like the answer is "of course." But I've also been on the other side as a marketer where I'm like, "I'm working with these creators. We're not getting the hits we're looking for." You hear of these viral sensations, but obviously there's a lot of trial and error. Do you have any thoughts? Is that just the move given the state we're in, or do you have any thoughts on how else we can do that effectively?
--:-- Olivia Moore: I do think we've seen a lot more businesses — both in-real-life businesses and apps — invest in TikTok acquisition or try to engineer TikTok virality over the last year. I think it's honestly very hard to do. Similar to how not every business needs an Instagram page with hundreds of thousands or millions of followers, I don't necessarily think every business needs a TikTok page with a huge following. If I were a small business, I would look for very organic ways to engage with smaller creators who have audiences that are very targeted to the type of people I'm looking for. I would also keep an eye on what platform seems to be winning on this next-gen Yelp vision that I think will play out over the next two to three years. Will it be Instagram with their new searchable map? Will it be TikTok? Will it be something else entirely? There probably is an advantage if you're one of the early businesses to capitalize on that platform.
--:-- Host: That makes sense. Something I want to ask you about before we close out is something you mentioned in your thread: the difference in geography. This is pretty front and center when you think about it. TikTok is obviously a Chinese company. You mentioned Temu, which is your horse for the year in terms of what you're watching. There does seem to be more diversity, not just from China, in terms of the apps rising to the top versus what used to be more U.S.-concentrated apps trending in America. Any learnings from that? Why are we seeing that change in the matrix of apps rising to the top?
--:-- Host: It plays out in the data, too, as well as just eyeballing the app store charts and seeing where things come from. In 2021, of the new startups that cracked the top number one for the first time, almost 85% of them were developed in the U.S. But in 2022, that had dropped to 45%. So we're seeing way more apps from China, from Russia, from Italy — really from all over. BeReal is originally from France, which is an interesting example that got mainstream adoption in the U.S.
--:-- Olivia Moore: I think there are a couple of trends driving this. One, a lot of the number ones this year played on themes like widgets and avatars. There are a lot of great international app studios and developers that fast-follow trends as they emerge and release products that capitalize on that excitement. When LockIt took off in the U.S., LiveIn in China was released a few weeks later, and then a wave of other widget apps came from all over the world — not just China or any specific market.
--:-- TikTok is another huge player here. To me, it's democratized the ability to go viral and see success outside of your home market. There was one app that hit number one this year called Travelboost — an interactive map where you can visualize all the places you've been. It originated in Russia, but it ended up with 500 million views on TikTok because people globally were making videos about their experiences and putting them on Travelboost. Before, a solo developer app coming out of Russia would have very little chance of mainstream success. But because of TikTok, it did, which is really exciting.
--:-- Host: That's a great point. In the past, it was really hard for an individual developer to have the budget or the connections to get the kind of traction we're seeing today. But now that we have access to distribution channels like TikTok, we're seeing more apps come to play, but also their ability to rise more quickly — which feeds into what we said before, making it harder to stay at the top.
--:-- With that said, Olivia, this has been so great. I want to give you the opportunity — you've shared so many examples already of apps that are worth knowing about, or tell us something about the state of the App Store.
--:-- Olivia Moore: Absolutely. There's one that comes to mind that I've been fascinated with recently. It's in the gaming category — an app called Subway Surfers, first launched in 2012 out of a studio in the Nordics where a lot of gaming apps come from. Even in 2014, people were publishing blog posts like, "Subway Surfers has so much longevity. It's been around for so long" — which at the time was three years — and it was still getting downloads. Now, more than 10 years later, they just cracked the top 10 most downloaded apps worldwide. Not just in the U.S., and not just for games — across both games and non-gaming apps.
--:-- According to independent data, they actually saw downloads grow 50% last year. They got about 300 million downloads. They've now been downloaded by almost 40% of the population, which is crazy — maybe on multiple devices if they've been around for 10 years. They've made some really smart moves to stay top of mind for that decade. They have this world tour strategy where the graphics and location of the game change every two weeks, which is really fun. They also built great social media profiles — 7 million subscribers on YouTube, another 6 million on TikTok.
--:-- But this year, I was trying to figure out what could have juiced them 50%. It turns out that especially Gen Z users, but all ages, have started split-screening TikTok videos. Because people have such short attention spans, they'll put the real video on top or the voiceover on top, and then they'll put a clip of someone playing Subway Surfers at the bottom of the video. The hope is that this will get the viewer to stop and stay engaged instead of scrolling away.
--:-- Host: That's so funny. I've seen a couple of examples of this — as you said, because people have short attention spans. I don't know if they're using Subway Surfers, but there are also examples of people trying to get around copyright infringement. Instead of duplicating a video, they'll just have a game video playing on the side. People are getting so creative these days. It's interesting to see an app used in ways the developers didn't even intend.
--:-- Olivia Moore: Yeah, and the downstream implications are interesting in terms of what it continues to do to our attention spans and what we expect from media. There was this meme that came out: "The next generation, Gen Alpha, is going to riot when they go to the movie theaters and Subway Surfers isn't playing on the bottom half." You're not going to be able to focus for that long. I don't know if that's true, but I think it'll be very interesting to track whether more videos or fewer videos end up doing that in the coming year.
--:-- Host: It's a great point — this idea of reducing attention spans and what comes next. If you think about it, it used to be you'd read a 10-minute-long article. People got bored of that. Then you watched a five-minute YouTube video. People got bored of that. Then you had an image on Instagram, then a short clip that's 30 seconds. And even that wasn't enough. So within the short clip, we speed up the music, we cut the screen. What comes next? I don't know how short you can get this, but we'll see.
--:-- I want to end with a fun little exercise. I feel like I've learned a lot in this conversation — so many themes, so many ideas. If someone's looking to create an app, maybe you can copy something you see on desktop, pay attention to technology changes on the iPhone, look at what's happening in other countries and duplicate it here. But if you, Olivia — having maybe one of the best understandings of what's happening in this app store — were tasked tomorrow to go build an app that you wanted to get to number one, what would you do? What would you think about?
--:-- Olivia Moore: Great question. This might be due to personal interest, but there's a fascinating trend around dog ownership and dogs — especially for young people, dogs are becoming the new children because people are having kids later or having fewer kids. They're spending more money on their dogs than ever before, and there aren't that many digital-first pet brands. So I would probably develop some sort of app around dog or pet ownership where you could show off, track, or keep an eye on your pet in a creative way. The core of it would be that it generates some sort of shareable asset that you could post across Instagram, Twitter, and TikTok to show everyone how cute your dog is. I think I might be in the idea maze for a little while longer, but there's hopefully something there.
--:-- Host: There's something there. To your point, pets have been taking off for years. As some people say, it's the recession-proof industry. If you look at pet industry growth relative to many other things, typically you'll see 2008 show up in sales. Pets is just a straight line upwards. And yes, people love talking about their pets, sharing pictures of their pets, looking at other pictures of pets. We talked about the need for some sort of sharing element or way to notify other people that you're on this app. So there is something there. Maybe — and I know people say this as a trope — Instagram for pets, or something where the pet is the influencer. Because you feel bad posting your whole Instagram feed being pictures of your pet. So do you do what I did and make a separate Instagram account for your dog? Or do you not have the attention for that?
--:-- Olivia Moore: My sister and I have joked for the past 10 years that if we ever started a business, it would be very fun — like how zoos have live streams where you can watch the animals throughout the day. Someone should create that for puppies, where you can just see cute puppies running around all day. Maybe that'll just be a genre on TikTok, but I think it's pretty popular. I know we're in that idea maze where it's like, is it a feature or a product?
--:-- Host: Speaking of maybe a viral app that could be created — maybe it already exists, but I don't think it would last long. You know how people say people buy pets that look like them? An app where you upload your two pictures and it tells you, "You're 61% like your dog," and someone else is like, "Oh, you're 99%." I think that could be pretty funny.
--:-- Olivia Moore: You have something there. I'm serious. I would download that in a heartbeat. That could be a number one for 2023. A very short-lived 2023 app.
--:-- Host: All right. Well, if someone wants to build that, go right ahead. Olivia, this was amazing. I feel like hopefully listeners have so many more angles to think about the app store — whether they want to create within it or at least understand the different apps we're downloading. Because to your point earlier, they really do represent our behavior, what we want to engage with, what we're paying attention to. Thank you so much for going through this. We'll definitely have to do another episode once we get the 2023 data.
--:-- Olivia Moore: Amazing. I can't wait. Thanks so much for having me. This was very fun.
--:-- Host: Thanks for listening to the a16z podcast. If you like this episode, don't forget to subscribe, leave a review, or tell a friend. We also recently launched on YouTube at youtube.com slash a16z underscore video, where you'll find exclusive video content. We'll see you next time. Thank you.
